## pp052317-eligibility-to-use-the-funds-facilities-for-concessional-financing-for-2017

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### Executive summary — framework and purpose
- The PRGT-eligibility review is conducted biennially under a transparent, rules-based, and parsimonious framework.
- Eligibility is determined by: (i) level of income per capita, (ii) market access, and (iii) serious short-term vulnerabilities.
- Application of the framework should be consistent with the self-sustainability of the PRGT’s lending capacity over time.

### Executive summary — main conclusions
- The existing PRGT-eligibility framework remains generally appropriate.
- No country is proposed for graduation from or entry onto the PRGT-eligibility list.
- Thirteen countries meet either the income or market access graduation criterion, but all are assessed to be facing serious short-term vulnerabilities and thus none are proposed for graduation.
- No non-PRGT-eligible country meets the criteria for entry onto the PRGT-eligibility list.
- The proposal to keep the list of PRGT-eligible countries unchanged is consistent with the self-sustained capacity of the PRGT.

### Alignment with IDA practices
- The PRGT-eligibility framework is broadly aligned with the World Bank’s International Development Association (IDA) practices, with minor differences explained by differences in mandates and timing of review cycles.
- As of March 2017, IDA and PRGT eligibility were aligned in all but eight cases.
- IDA’s operational cutoff (fiscal year 2017) is $1,185 per capita and IDA’s recent assessment kept its eligibility criteria broadly unchanged.
- Divergences reflect institutional differences: World Bank financing focuses on steady long-term development finance; IMF financing focuses on temporary balance of payments support.

### Recent history of graduations and risk of reverse graduation
- Twelve countries have graduated from the PRGT-eligibility list since adoption of the current eligibility framework in 2010.
- Pace of graduations: six in 2010; none in 2012; two in 2013; four in 2015.
- Many countries that met income or market access criteria in previous reviews were not proposed for graduation because they failed the “absence of serious short-term vulnerabilities” criterion.
- None of the countries that have graduated from the PRGT-eligibility list are at immediate risk of re-entering it.
- GNI per capita in recent graduates is at present well above the relevant income entry thresholds.
- GNI per capita has declined from its graduation level only in Mongolia; the most recent GNI per capita level still exceeds the graduation threshold by 63 percent.
- All twelve graduate countries have had access to global capital markets in the years since their graduation.

### Key operational details of the eligibility framework (high-level)
- Entry criteria:
  - annual per capita GNI below the applicable IDA cutoff (with adjusted thresholds for small countries and microstates) AND lack of durable and substantial market access.
- Graduation criteria:
  - either sustained GNI per capita above specified thresholds over five years OR durable and substantial market access (three of last five years with cumulative issuance equivalent to at least 50 percent of quota), AND absence of serious short-term vulnerabilities.
- Exception:
  - For members whose annual per capita GNI exceeds the applicable income graduation threshold by 50 percent or more, graduation is not subject to assessment of serious short-term vulnerabilities, except where World Bank status (IDA grant-only or IDA loan-grant mix) requires Executive Board assessment of vulnerabilities.
- Market access:
  - Allows a case-specific assessment where actual borrowing falls short of thresholds but other evidence (e.g., sovereign credit rating) indicates durable and substantial access.

### Notable specifics from the 2015 Review
- Four countries graduated from PRGT-eligibility in 2015: Bolivia, Mongolia, Nigeria, and Vietnam.
- 2015 Review introduced:
  - incorporation of domestic and/or private external debt into overall debt vulnerability assessment;
  - limiting application of the serious short-term vulnerabilities criterion for richer countries;
  - formal introduction of additional data sources in assessing market access.

### Assessment of framework and staff proposal
- No modifications are proposed to the PRGT-eligibility framework.
- The framework is broadly appropriate and well aligned with IDA practices.
- Staff proposes not to graduate any current PRGT-eligible members in this review, consistent with the financial self-sustainability of the PRGT.

### Countries meeting graduation criteria and short-term vulnerabilities
- Thirteen PRGT-eligible members meet the income and/or market access criteria for graduation; no new countries qualify for entry onto the list.
- Seven meet the criteria for the first time: Bhutan, Cameroon, Honduras, Kenya, Lao PDR, St. Lucia, and Zambia.
- Six that met criteria at 2015 review and continue to meet them: Congo, Rep; Cote d’Ivoire; Ghana; Grenada; Guyana; Maldives.
- Country-level summary (selected):
  - Bhutan, Cote d’Ivoire, Honduras, and Kenya meet the market access graduation criterion and are not assessed to be at high risk of debt distress or in debt distress.
  - Guyana meets the income graduation criterion and is not assessed to be at high risk of debt distress or in debt distress.
  - Republic of the Congo meets both market access and income criteria and is not assessed to be at high risk of debt distress or in debt distress.
  - Cameroon, Ghana, Grenada, Lao PDR, Maldives, St. Lucia, and Zambia meet income and/or market access criteria but are assessed to be at high risk of debt distress or in debt distress and therefore cannot be considered for PRGT graduation.
- Reasons for not proposing graduation despite meeting criteria:
  - Six countries meet either income or market access criterion and are not assessed to be at high risk of debt distress or in debt distress, but are nonetheless not proposed for graduation because they currently face other serious short-term vulnerabilities.
  - GNI per capita is below the relevant income graduation threshold in all of these countries except Republic of Congo and Guyana.
  - GNI per capita is at or very close to PRGT income entry threshold in Bhutan, Cote d’Ivoire, and Kenya, posing a risk that a decline in growth could cause reverse graduation.
  - All countries except Republic of Congo are IDA-only; premature graduation would lead to prolonged misalignment with IDA status.

### Country-specific vulnerability notes (concise)
- Bhutan:
  - increasing dependence on electricity exports to India; substantial external debt for hydropower; weak debt management capacity; GNI per capita similar to PRGT income entry threshold.
- Republic of the Congo:
  - high dependence on commodity exports; sharp erosion of fiscal and external buffers; rapid accumulation of debt after decline in oil prices.
- Cote d’Ivoire:
  - negative terms of trade shock; financial sector vulnerabilities including capital-deficient public banks.
- Guyana:
  - exposure to commodity price volatility; U.S. dollar appreciation; de-risking by global banks; expected sharp rise in public debt due to ambitious investment program; recent increase in NPLs.
- Honduras:
  - domestic risks including high crime and corruption; structural reforms needed but may be difficult given electoral cycle.
- Kenya:
  - growth affected by sharp credit slowdown linked to interest rate controls and drought; inflation up; general elections scheduled for August 2017 may impede fiscal consolidation and increase political uncertainty.

### Financing implications and projected demand for PRGT resources
- PRGT’s self-sustained capacity can accommodate staff’s proposal not to graduate countries in this review.
- Staff projections: overall annual average demand for IMF concessional resources for 2017–31 would be in the range of SDR 1.1-1.8 billion.
- The projected demand range is broadly in line with 2015 PRGT-eligibility review projections and consistent with PRGT’s self-sustained capacity, currently estimated at about SDR 1.3 billion.
- Longer-term projections assume continued graduation of countries from PRGT-eligibility list in future reviews.
- Income projections indicate a further 18 countries could potentially graduate from PRGT-eligibility list in 2018–25; pace could be faster if more PRGT-eligible countries acquired market access or slower if countries faced serious short-term vulnerabilities.

### Projected demand scenarios (average annual demand — figures preserved)
- 2015 PRGT eligibility review (2015–21): Low-case scenario 1.0, High-case scenario 1.5
- Updated baseline (2017–21): Low-case scenario 1.2, High-case scenario 1.7
- Updated baseline (2017–26): Low-case scenario 1.0, High-case scenario 1.7
- Updated baseline (2017–31): Low-case scenario 1.1, High-case scenario 1.8
- Scenario assumptions:
  - Low-case assumes about 30 percent of PRGT-eligible countries would resort to Fund financing in any given year.
  - High-case assumes some 55 percent of the countries request some form of Fund financial support in any given year.
  - Estimates incorporate modifications to the interest rate setting mechanism approved in October 2016.
  - For PRGT-eligible countries presumed to blend, it is assumed that a third of access to Fund resources is from the PRGT.

### PRGT graduation criteria (Annex I summary — highlights)
- Income criterion:
  - GNI per capita (Atlas method) has been above the World Bank's IDA operational cutoff for the last five years.
  - Exceeding by 50 percent or more the relevant income graduation threshold removes the short-term vulnerabilities criterion if not a recipient of IDA "grant only" or "IDA loan-grant mix" assistance.
- Market access criterion:
  - Public issuance or guarantee of external bonds or disbursement of external commercial loans in at least three of the last five years in a cumulative amount of at least 50 percent of the country's quota OR convincing evidence of durable and substantial market access.
- Short-term vulnerabilities criterion:
  - Absence of serious short-term vulnerabilities comprising the risk of a sharp decline in income, loss of market access, and/or debt vulnerabilities.
- Note: The World Bank operational cutoff is $1,185 in FY2017.

### Annex Table 2 — selected key statistics (preserved exactly as in source)
- Maldives: 33; 2; 7; 0.1; -; -; 144; 29; 6950.
- Bhutan: 9; 9; 9; 7; -; -; 123; 90; 2380.
- Mozambique: 139; 28; 872; 405; 605; 727; 669; 861; 590.
- Cameroon: 5; 22; 45; 40; 843; -; 256; 255; 1320.
- Cabo Verde: 25; 43; 64; 96; 29; -; 804; 724; 3280.
- Congo, Rep.: 112; 150; 110; 49; -; -; 193; 141; 2540.
- Côte d'Ivoire: -; 1,167; 1,251; 754; 1,000; -; 476; 476; 1420.
- Ethiopia: 473; 617; 385; 1,377; 793; -; 899; 782; 590.
- Ghana: 506; 278; 1,744; 1,694; 1,728; 750; 598; 622; 1480.
- Lao PDR: 3; 1; 145; 170; 614; 85; 654; 711; 1740.
- Uzbekistan: 75; 10; 10; 116; 116; -; 44; 34; 2160.
- Zambia: -; 750; -; -; 1,250; 73; 152; 157; 1490.
- Zimbabwe: -; -; -; 1.1; -; -; 0.11; 0.11; 860.
- Key non-eligible: Bolivia: 66; 566; 500; -; -; -; 350; 329; 3000.
- Key non-eligible: Vietnam: 750; 1,247; 2,212; 2,140; 436; 550; 436; 424; 1990.

### Selected country assessments and staff recommendations (concise)
- Bhutan:
  - Background: GNI per capita doubled from US$1,070 in 2004 to $2,370 in 2015; real GDP growth expected to reach 6.4 percent in 2016/17; public and publicly-guaranteed external debt expected to hit 113 percent of GDP in 2016/17; current account deficit expected to hit 31 percent of GDP in 2016/17; more than 70 percent of external debt linked to hydropower.
  - Assessment and recommendation: Staff proposes maintaining Bhutan’s PRGT eligibility given serious short-term vulnerabilities.
  - Income criterion: 2015 GNI per capita US$2,370, 33 percent below the relevant income graduation threshold.
  - Market access criterion: tapped international markets four times during 2011–15, borrowing cumulatively 123 percent of its IMF quota.
  - Short-term vulnerabilities: high risk of distress in DSA; weak debt management capacity; GNI per capita equal to PRGT income entry threshold—small shocks could risk reverse graduation.
- Republic of the Congo:
  - Background: growth slowed to -2.7 percent in 2016 from 2.6 percent in 2015; overall fiscal deficit 27.0 percent of non-oil GDP in 2016; public debt-to-GDP almost 79 percent in 2016; current account deficit widened to 42.9 percent of GDP in 2015.
  - Assessment and recommendation: Staff proposes maintaining PRGT eligibility; expected reassessment at next review.
  - Income criterion: GNI per capita US$2,540, 7 percent above relevant income graduation threshold.
  - Market access criterion: external borrowing through commercial markets amounting to 129 percent of its IMF quota between 2012-2016 via three issuances.
  - Short-term vulnerabilities: emergence of arrears, rapid depletion of imputed reserves, high oil-dependence, rising debt vulnerabilities.
- Côte d’Ivoire:
  - Background: affected by external and domestic shocks in 2017—a sharp drop in cocoa prices and intensified social tensions; supported by a three-year blend ECF/ECF arrangement with requested augmentation; IDA recipient with moderate risk of debt distress.
  - Assessment: Staff proposes maintaining PRGT eligibility given serious short-term vulnerabilities.
  - Income criterion: 2015 GNI per capita US$1,410, 40 percent below the relevant income graduation threshold.
  - Market access criterion: accessed international markets in four of last five years, cumulative amount 476 percent of IMF quota.
  - Short-term vulnerabilities: fragile socio-political environment; financial sector vulnerabilities including capital-deficient public banks; GNI per capita volatility historically signals risk of re-entry.
- Guyana:
  - Background: decade of uninterrupted growth; economy depends on export of six commodities (~40 percent of GDP); real GDP growth 3.3 percent in 2016; growth expected 3.5 percent in 2017; current account deficit projected 3½ percent in 2017 (excluding official transfers ~1 percent of GDP); fiscal overall balance expected -7.2 percent of GDP in 2017 from -2.9 percent in 2016.
  - Assessment: Staff proposes maintaining PRGT eligibility given serious short-term vulnerabilities.
  - Income criterion: GNI per capita US$4,090, 15 percent above relevant income graduation threshold; income per capita above IDA operational threshold over last five years.
  - Market access criterion: did not access international markets in any of last five years.
  - Short-term vulnerabilities: exposure to commodity price volatility; expected public debt rise from 48 percent in 2016 to 60 percent in 2020; NPLs rising; de-risking by global banks.
- Honduras:
  - Background: domestic security and fiscal discipline improved; real GDP estimated +3.6 percent in 2016; IDA recipient with moderate risk of debt distress; supported by three-year Stand-By Arrangement (precautionary).
  - Assessment: Staff proposes maintaining PRGT eligibility given serious short-term vulnerabilities.
  - Income criterion: 2015 GNI per capita US$2,270, 4 percent below relevant income graduation threshold.
  - Market access criterion: accessed international markets in four of last five years, cumulative 364 percent of IMF quota.
  - Short-term vulnerabilities: downside risks from global and domestic uncertainties including high crime and corruption; structural reforms may be difficult amid electoral cycle.
- Kenya:
  - Background: real GDP growth near 5½ percent in recent years; drought slowed growth in H2 2016; inflation 9 percent in February 2017; current account deficit about 5½ percent of GDP; reserves above 5 months of prospective imports; supported by two-year Stand-By Arrangement and two-year Stand-By Credit Facility (precautionary); IDA recipient with low risk of debt distress.
  - Assessment: Staff proposes maintaining PRGT eligibility given serious short-term vulnerabilities.
  - Income criterion: 2015 GNI per capita US$1,340, 43 percent below relevant income graduation threshold.
  - Market access criterion: accessed international markets in all of last five years, cumulative 642 percent of IMF quota.
  - Short-term vulnerabilities: drought risk to growth and food inflation; bank credit slowdown (from 18 percent in 2015 to 4 percent in 2016) linked to interest rate caps; programmed fiscal consolidation exceeding 3 percent of GDP over next 3 years; national elections in August 2017 pose policy implementation risks; GNI per capita only 13 percent above relevant income entry threshold—negative shocks could lower it below threshold.

*Source: International Monetary Fund (text from pp052317-eligibility-to-use-the-funds-facilities-for-concessional-financing-for-2017).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Framework and purpose
- The PRGT-eligibility review is conducted biennially under a transparent, rules-based, and parsimonious framework.
- The framework determines IMF members’ access to concessional resources based on: (i) level of income per capita, (ii) market access, and (iii) serious short-term vulnerabilities.
- Application of the framework should be consistent with the self-sustainability of the PRGT’s lending capacity over time.

### Main conclusion of the review
- The existing PRGT-eligibility framework remains generally appropriate.
- No country is proposed for graduation from or entry onto the PRGT-eligibility list.
- Thirteen countries meet either the income or market access graduation criterion, but all are assessed to be facing serious short-term vulnerabilities and thus none are proposed for graduation.
- No non-PRGT-eligible country meets the criteria for entry onto the PRGT-eligibility list.
- The proposal to keep the list of PRGT-eligible countries unchanged is consistent with the self-sustained capacity of the PRGT.

### Alignment with IDA practices
- The PRGT-eligibility framework is broadly aligned with the World Bank’s International Development Association (IDA) practices, with minor differences explained by differences in mandates and timing of review cycles.
- As of March 2017, IDA and PRGT eligibility were aligned in all but eight cases.
- IDA’s operational cutoff (fiscal year 2017) is $1,185 per capita and IDA’s recent assessment kept its eligibility criteria broadly unchanged.
- Divergences reflect institutional differences: World Bank financing focuses on steady long-term development finance; IMF financing focuses on temporary balance of payments support.

### Recent history of graduations and risk of reverse graduation
- Twelve countries have graduated from the PRGT-eligibility list since the adoption of the current eligibility framework in 2010.
- The pace of graduations has been measured and non-linear: six countries graduated in 2010; none in 2012; two in 2013; and four in 2015.
- Many countries that met the income or market access criteria in previous reviews were not proposed for graduation because they failed to satisfy the “absence of serious short-term vulnerabilities” criterion.
- None of the countries that have graduated from the PRGT-eligibility list are at immediate risk of re-entering it.

### Key operational details of the eligibility framework (high-level)
- Entry criteria: annual per capita GNI below the applicable IDA cutoff (with adjusted thresholds for small countries and microstates) and lack of durable and substantial market access.
- Graduation criteria: either sustained GNI per capita above specified thresholds over five years or durable and substantial market access (three of last five years with cumulative issuance equivalent to at least 50 percent of quota), and absence of serious short-term vulnerabilities.
- For members whose annual per capita GNI exceeds the applicable income graduation threshold by 50 percent or more, graduation is not subject to the assessment of serious short-term vulnerabilities, except where World Bank status (IDA grant-only or loan-grant mix) requires Executive Board assessment of vulnerabilities.

### Notable specifics reported in the review
- Four countries graduated from PRGT-eligibility in 2015: Bolivia, Mongolia, Nigeria, and Vietnam.
- The 2015 Review introduced: (i) incorporation of domestic and/or private external debt into overall debt vulnerability assessment; (ii) limiting application of the serious short-term vulnerabilities criterion for richer countries; and (iii) formal introduction of additional data sources in assessing market access.
- The market access criterion allows a case-specific assessment where actual borrowing falls short of thresholds but other evidence (e.g., sovereign credit rating) indicates durable and substantial access.

### Contents and structure of the full review (topics covered)
- Current framework
- Alignment with IDA practices
- Risk of reverse graduation
- Assessment of the framework and list of countries eligible for PRGT graduation
- Financing implications
- Issues for discussion

*Prepared by the Strategy, Policy and Review Department, Finance Department, and Legal Department; April 13, 2017.*

### 10.      None of the recent graduates are currently at risk of reverse graduation. GNI per capita

### pp052317-eligibility-to-use-the-funds-facilities-for-concessional-financing-for-2017 - 10.      None of the recent graduates are currently at risk of reverse graduation. GNI per capita

### Recent graduates and reverse graduation risk
- None of the recent graduates are currently at risk of reverse graduation.
- GNI per capita in the recent graduates is at present well above the relevant income entry thresholds.
- Income in most countries that have graduated from the PRGT-eligibility list has surged since graduation, with the exception of income in commodity-rich countries, hit by the drop in commodity prices in 2015.
- Income in Albania has been range-bound due to impact from developments in the Euro Area, its main trading partner.
- GNI per capita has declined from its graduation level only in Mongolia; the most recent GNI per capita level still exceeds the graduation threshold by 63 percent.
- All of the twelve graduate countries have had access to global capital markets in the years since their graduation.

### Assessment of the PRGT-eligibility framework
- No modifications are proposed to the PRGT-eligibility framework.
- The framework is assessed as broadly appropriate: none of the countries that have graduated from the list seem to be at risk of reverse graduation.
- The current framework is well aligned with IDA practices given the relatively small number of differences between the lists of IDA- and PRGT-eligible countries.
- Staff proposes not to graduate any of the current PRGT-eligible members in this review, consistent with the financial self-sustainability of the PRGT.

### Countries meeting graduation criteria and short-term vulnerabilities
- Thirteen countries are in principle eligible for graduation from the PRGT-eligibility list; no new countries qualify for entry onto the list.
- Of the thirteen PRGT-eligible members that meet the income and/or market access criteria for graduation, seven meet the criteria for the first time: Bhutan, Cameroon, Honduras, Kenya, Lao PDR, St. Lucia, and Zambia.
- Six countries that met the income or market access graduation criterion at the time of the 2015 review (but did not graduate) continue to meet them: Congo, Rep; Cote d’Ivoire; Ghana; Grenada; Guyana; and Maldives.
- Specific country assessments:
  - Bhutan, Cote d’Ivoire, Honduras, and Kenya meet the market access graduation criterion and are not assessed to be at high risk of debt distress or in debt distress.
  - Guyana meets the income graduation criterion and is not assessed to be at high risk of debt distress or in debt distress.
  - The Republic of the Congo meets both the market access and income graduation criteria and is not assessed to be at high risk of debt distress or in debt distress.
  - Cameroon, Ghana, Grenada, Lao PDR, Maldives, St. Lucia, and Zambia meet the income and/or market access criteria but are assessed to be at high risk of debt distress or in debt distress and therefore cannot be considered for PRGT graduation.
- Reasons countries meeting criteria are not proposed for graduation:
  - Six countries meet either the income or market access criterion and are not assessed to be at high risk of debt distress or in debt distress, but are not proposed for graduation because they currently face other serious short-term vulnerabilities.
  - GNI per capita is below the relevant income graduation threshold in all of these countries except the Republic of Congo and Guyana.
  - GNI per capita is at or very close to the PRGT income entry threshold in Bhutan, Cote d’Ivoire, and Kenya, posing a risk that a decline in growth could cause reverse graduation.
  - All countries except for the Republic of Congo are IDA-only; premature graduation would lead to prolonged misalignment with IDA status.
- Country-specific vulnerability notes:
  - Bhutan: increasing dependence on electricity exports to India, substantial external debt for hydropower, weak debt management capacity, GNI per capita similar to PRGT income entry threshold.
  - Republic of the Congo: high dependence on commodity exports, sharp erosion of fiscal and external buffers, rapid accumulation of debt after decline in oil prices.
  - Cote d’Ivoire: negative terms of trade shock, financial sector vulnerabilities including capital-deficient public banks.
  - Guyana: exposure to commodity price volatility, U.S. dollar appreciation, de-risking by global banks, expected sharp rise in public debt due to ambitious investment program, recent increase in NPLs.
  - Honduras: domestic risks including high crime and corruption; structural reforms needed but may be difficult given electoral cycle.
  - Kenya: growth affected by sharp credit slowdown linked to interest rate controls and drought; inflation up; general elections scheduled for August 2017 may impede fiscal consolidation and increase political uncertainty.

### Financing implications and projected demand for PRGT resources
- The PRGT’s self-sustained capacity can accommodate the staff’s proposal not to graduate countries from the PRGT-eligibility list in this review.
- Staff projections suggest that the overall annual average demand for the IMF concessional resources for 2017–31 would be in the range of SDR 1.1-1.8 billion.
- The projected demand range is broadly in line with the demand range projected at the time of the 2015 PRGT-eligibility review and consistent with the PRGT’s self-sustained capacity, currently estimated at about SDR 1.3 billion.
- Longer-term projections assume continued graduation of countries from the PRGT-eligibility list in future reviews.
- Income projections indicate that a further 18 countries could potentially graduate from the PRGT-eligibility list in 2018–25; the pace of graduation could be faster if more PRGT-eligible countries acquired market access or slower if countries faced serious short-term vulnerabilities.

### Projected demand scenarios (average annual demand)
- 2015 PRGT eligibility review (2015–21): Low-case scenario 1.0, High-case scenario 1.5
- Updated baseline (2017–21): Low-case scenario 1.2, High-case scenario 1.7
- Updated baseline (2017–26): Low-case scenario 1.0, High-case scenario 1.7
- Updated baseline (2017–31): Low-case scenario 1.1, High-case scenario 1.8
- Scenario assumptions:
  - Low-case assumes about 30 percent of PRGT-eligible countries would resort to Fund financing in any given year.
  - High-case assumes some 55 percent of the countries request some form of Fund financial support in any given year.
  - Estimates incorporate modifications to the interest rate setting mechanism approved in October 2016.
  - For PRGT-eligible countries presumed to blend, it is assumed that a third of access to Fund resources is from the PRGT.

### PRGT graduation criteria (Annex I summary)
- Income criterion highlights:
  - GNI per capita (Atlas method) has been above the World Bank's IDA operational cutoff for the last five years.
  - GNI per capita is currently at least twice the World Bank's IDA operational cutoff for certain cases; special multipliers apply for small countries and microstates.
  - Exceeding by 50 percent or more the relevant income graduation threshold removes the short-term vulnerabilities criterion if not a recipient of IDA "grant only" or "IDA loan-grant mix" assistance.
- Market access criterion highlights:
  - Public issuance or guarantee of external bonds or disbursement of external commercial loans in at least three of the last five years in a cumulative amount of at least 50 percent of the country's quota OR convincing evidence of durable and substantial market access.
- Short-term vulnerabilities criterion:
  - Absence of serious short-term vulnerabilities comprising the risk of a sharp decline in income, loss of market access, and/or debt vulnerabilities.
- Note: The World Bank operational cutoff is $1,185 in FY2017.

*Source: International Monetary Fund (text from pp052317-eligibility-to-use-the-funds-facilities-for-concessional-financing-for-2017).*

### Annex Table 2. PRGT-Eligible Countries: Public and

### Annex Table 2. PRGT-Eligible Countries: Public and Publicly-Guaranteed (PPG) Debt, and GNI per Capita

### Data sources and methods
- Sources: World Bank, International Debt Statistics, and World Development Indicators. IMF BEL database (sourced from Dealogic).
- Note 1/: Data from 2009 to 2015 are from the World Bank International Debt Statistics, accessed March 1, 2017. Data for 2016 are from the IMF BEL database (sourced from Dealogic).
- Table fields include: PPG external bonds and commercial loans (Disbursements in millions of US dollars), 2015 GNI per capita - at 100 percent of IDA threshold ($1185), GNI per capita, Atlas, Cumulative 2011-2015 (in % of Quota 2016), Cumulative 2012-2016 (in % of Quota 2016), and Method 2015.

### Key statistics (selected country figures preserved exactly as in source)
- Maldives: 33; 2; 7; 0.1; -; -; 144; 29; 6950.
- Bhutan: 9; 9; 9; 7; -; -; 123; 90; 2380.
- Mozambique: 139; 28; 872; 405; 605; 727; 669; 861; 590.
- Cameroon: 5; 22; 45; 40; 843; -; 256; 255; 1320.
- Cabo Verde: 25; 43; 64; 96; 29; -; 804; 724; 3280.
- Congo, Rep.: 112; 150; 110; 49; -; -; 193; 141; 2540.
- Côte d'Ivoire: -; 1,167; 1,251; 754; 1,000; -; 476; 476; 1420.
- Ethiopia: 473; 617; 385; 1,377; 793; -; 899; 782; 590.
- Ghana: 506; 278; 1,744; 1,694; 1,728; 750; 598; 622; 1480.
- Lao PDR: 3; 1; 145; 170; 614; 85; 654; 711; 1740.
- Uzbekistan: 75; 10; 10; 116; 116; -; 44; 34; 2160.
- Zambia: -; 750; -; -; 1,250; 73; 152; 157; 1490.
- Zimbabwe: -; -; -; 1.1; -; -; 0.11; 0.11; 860.
- Key non-eligible: Bolivia: 66; 566; 500; -; -; -; 350; 329; 3000.
- Key non-eligible: Vietnam: 750; 1,247; 2,212; 2,140; 436; 550; 436; 424; 1990.
- (All numeric entries preserved exactly as shown in source table excerpt.)

### Country assessments and staff recommendations (selected detailed entries)

- Bhutan:
  - Background findings:
    - GNI per capita doubled from US$1,070 in 2004 to $2,370 in 2015.
    - Real GDP growth expected to reach 6.4 percent in 2016/17 from below 4 percent in FY2012/13 and FY2013/14.
    - Inflation has declined to single digits from over 10 percent (average) in FY2012/13.
    - Public and publicly-guaranteed external debt expected to hit 113 percent of GDP in 2016/17.
    - Current account deficit expected to hit 31 percent of GDP in 2016/17.
    - More than 70 percent of the external debt is linked to the development of the hydropower sector.
    - Bhutan is an IDA-only country and is classified at moderate risk of debt distress.
  - Assessment and recommendation:
    - Staff proposes maintaining Bhutan’s PRGT eligibility given the presence of serious short-term vulnerabilities.
  - Income Criterion:
    - In 2015, GNI per capita was US$2,370, 33 percent below the relevant income graduation threshold.
  - Market Access Criterion:
    - Bhutan tapped international markets four times during 2011–15, borrowing cumulatively 123 percent of its IMF quota, well above the threshold of 50 percent of quota.
  - Serious Short-Term Vulnerabilities (concise points preserved from source):
    - Increased hydropower investment should drive increased domestic revenue and electricity exports, but also risks overheating the economy and undermining the exchange rate peg to the Indian rupee.
    - Approximately 90 percent of exports go to India and electricity expected to comprise 42 percent of total exports by 2017/18.
    - Quantitative outputs of the most recent DSA indicate a high risk of distress, with Bhutan breaching all indicative thresholds of the LIC-DSA in the baseline.
    - Debt management capacity remains weak and the composition of reserves is misaligned with Bhutan’s external liabilities and trade structure.
    - Bhutan’s GNI per capita is equal to the PRGT income entry threshold, indicating that even a small growth shock could cause Bhutan to breach this threshold and risk reverse graduation.
    - Conclusion: short-term vulnerabilities considered too elevated to merit graduation from PRGT eligibility at this time.

- Congo, Republic of:
  - Background findings:
    - Growth slowed to -2.7 percent in 2016 from 2.6 percent in 2015 on declining oil production.
    - Overall fiscal deficit decreased in 2016 but remained very large at 27.0 percent of non-oil GDP.
    - Public debt-to-GDP ratio estimated to have risen to almost 79 percent in 2016 from 45 percent in 2014.
    - Current account deficit widened by over 30 percentage points of GDP to 42.9 percent of GDP in 2015 and is estimated to have narrowed in 2016.
    - The Republic of the Congo is an IDA blend country assessed to be at a moderate risk of debt distress in the most recent DSA (2015).
  - Assessment and recommendation:
    - Staff proposes maintaining the Republic of the Congo’s PRGT eligibility given the presence of serious short-term vulnerabilities, with the expectation it will be reassessed at the time of the next PRGT eligibility review.
  - Income Criterion:
    - The Republic of Congo meets the income criterion for graduation with GNI per capita of US$2,540, which is 7 percent above the relevant income graduation threshold.
  - Market Access Criterion:
    - The Republic of Congo meets the market access criterion with external borrowing through commercial markets amounting to 129 percent of its IMF quota between 2012-2016 via three issuances.
  - Serious Short-Term Vulnerabilities (concise points preserved from source):
    - Emergence of significant domestic and external arrears and rapid depletion of imputed reserves raise serious concerns about sustainability.
    - Dependence on oil exports makes Congo highly vulnerable to price shocks.
    - Recent developments point to rising debt vulnerabilities; recommendation is not to graduate from PRGT eligibility at this time.

- Côte d’Ivoire:
  - Background findings:
    - Growth averaged 9 percent during 2012–15.
    - Growth expected about 7 ½ percent in 2016, with subdued inflation of 1 percent.
    - Public debt-to-GDP ratio rose from 43 percent in 2013 to an estimated 48 percent (figure continued in source beyond excerpt).

*International Monetary Fund — content as presented in the source unit.*

### 2016. However, the country was affected by a combination of external and domestic shocks in

### ELIGIBILITY TO USE THE FUND’S FACILITIES FOR CONCESSIONAL FINANCING

### Cote d’Ivoire
- Background
  - The country was affected by a combination of external and domestic shocks in 2017—a sharp drop in the price of cocoa and intensification of domestic social tensions—that have clouded the macroeconomic outlook and put pressure on fiscal and external positions.
  - Cote d’Ivoire is currently supported by a three-year blend Extended Arrangement and Extended Credit Facility Arrangement, for which the authorities have recently requested a large augmentation.
  - It is an IDA recipient with a moderate risk of debt distress.
- Assessment
  - Staff proposes maintaining Cote d’Ivoire PRGT eligibility given the presence of serious short-term vulnerabilities.
- Income Criterion
  - Cote d’Ivoire does not meet the income criterion for graduation. In 2015, Cote d’Ivoire’s GNI per capita was US$1,410, which is 40 percent below the relevant income graduation threshold.
- Market Access Criterion
  - Cote d’Ivoire meets the market access criterion for graduation. It accessed international markets in four out of the last five years in a cumulative amount of 476 percent of its IMF quota.
- Serious Short-Term Vulnerabilities
  - Though Côte d’Ivoire is at a moderate risk of debt distress, it faces macroeconomic risks stemming from fragile socio-political environment and financial sector vulnerabilities, including in systematically-important public banks.
  - Tighter and more volatile global financial conditions along with an increased perception of domestic political risks could substantially increase public and private sector funding costs.
  - GNI per capita is well below the relevant IDA income graduation threshold, and poverty remains well above its historical average.
  - Cote d’Ivoire has experienced significant volatility in GNI per capita: between 1988-1994 and 1997-2002 GNI per capita declined by 25 percent, respectively. This is significantly more than the 20 percent margin by which Cote d’Ivoire’s GNI per capita currently exceeds the PRGT income entry threshold, indicating a risk of re-entry onto the eligibility list in the event of a similar shock (other criteria being met).
  - The authorities’ recent request for an augmentation of their ECF/EFF arrangement underscores the weakening of Cote d’Ivoire’s macroeconomic outlook.
  - In view of these challenges, staff do not recommend graduation from PRGT eligibility at this time.

### Guyana
- Background
  - Guyana has experienced a decade of uninterrupted growth.
  - The economy depends on the export of six commodities, which represent nearly 40 percent of GDP.
  - In 2016, subdued global agricultural commodity prices and adverse weather conditions led to a contraction in agriculture, while a slowdown in public investment created slack in the construction sector.
  - Large increases in gold output led to real GDP growth of 3.3 percent in 2016, up from 3.1 percent in 2015.
  - Growth is expected to pick up to 3.5 percent in 2017, supported by an increase in public investment, the development of Guyana’s recently discovered oil deposits, and a recovery in rice production.
  - The current account deficit is projected to stabilize at 3½ percent in 2017 (excluding official transfers of about 1 percent of GDP), as a result of a continuation of low oil prices, and reserve coverage to remain at 3.5 months of imports.
  - The fiscal overall balance is expected to deteriorate sharply to -7.2 percent of GDP in 2017 from -2.9 percent in 2016.
  - NPLs are rising, though capital adequacy ratios appear comfortable for the time being.
  - Guyana is an IDA recipient with a moderate risk of debt distress.
- Assessment
  - Staff proposes maintaining Guyana PRGT eligibility given the presence of serious short-term vulnerabilities.
- Income Criterion
  - Guyana meets the income criterion for graduation with GNI per capita of US$4,090, which is 15 percent above the relevant income graduation threshold.
  - Income per capita has been on an upward trend and has been above the IDA operational threshold over the last five years.
- Market Access Criterion
  - Guyana does not meet the market criterion for graduation as it did not access international markets in any of the last five years.
  - Guyana does not have a history of tapping international financial markets and its sovereign debt is not rated by any of the major credit rating agencies. It is thus unlikely to be able to access international markets on a durable and substantial basis.
- Serious Short-Term Vulnerabilities
  - A subdued outlook for non-oil commodity prices and Guyana’s de facto linkage to a strong U.S. dollar could create substantial headwinds to growth.
  - A prolonged period of fiscal expansion under the authorities’ public investment program is expected to cause the public debt-to-GDP ratio to rise from 48 percent in 2016 to 60 percent in 2020.
  - Oil price volatility represents a major source of fiscal and external vulnerability, particularly after the termination of Guyana’s PetroCaribe financing.
  - Guyana faces macro-financial stability risks stemming from an increase in NPLs and de-risking by global banks, leading to a potential cutoff of correspondent relationships.
  - In view of these developments, staff assesses that Guyana faces serious short-term debt vulnerabilities and does not recommend graduation from PRGT eligibility at this time.

### Honduras
- Background
  - Over the last several years, domestic security and fiscal discipline have improved, contributing to macroeconomic stabilization.
  - Real GDP is estimated to have increased by 3.6 percent in 2016, supported by a rise in public sector infrastructure investment and a supportive monetary policy stance.
  - Lower oil prices have helped to reduce inflation and narrow the external current account deficit.
  - The banking sector appears to be broadly resilient to most shocks, though the high level of unhedged foreign currency borrowing in some sectors remains a source of concern.
  - Honduras is supported by a three-year Stand-By Arrangement, which the authorities are treating as precautionary.
  - It is an IDA recipient with a moderate risk of debt distress.
- Assessment
  - Staff proposes maintaining Honduras’ PRGT eligibility given the presence of serious short-term vulnerabilities.
- Income Criterion
  - Honduras does not meet the income criterion for graduation. In 2015, Honduras’ GNI per capita was US$2,270, which is 4 percent below the relevant income graduation threshold.
- Market Access Criterion
  - Honduras meets the graduation criterion. It accessed international markets in four out of the last five years in a cumulative amount of 364 percent of its IMF quota.
- Serious Short-Term Vulnerabilities
  - Over the medium term, growth is expected to converge to its potential at 3.8 percent.
  - Risks to the outlook are predominantly on the downside due to global uncertainties and domestic risks including those related to high crime and corruption.
  - Achievement of growth potential hinges on continued strong implementation of structural reforms, which may prove difficult, particularly in light of a potentially charged electoral cycle.
  - In view of these developments, which suggest a risk of Honduras potentially losing its market access, staff do not recommend graduation from PRGT eligibility at this time.

### Kenya
- Background
  - Real GDP growth has been near 5½ percent for the past few years, driven by expansion in the construction and electricity sectors, favorable weather conditions, and a recovery in tourism.
  - A severe and continuing drought slowed growth in the second half of 2016 and contributed to a surge in food prices.
  - Higher food and energy prices boosted inflation to 9 percent in February 2017, above the top of the 5 +/- 2.5 percent inflation targeting band, with core inflation below 4 percent.
  - The current account deficit has remained contained at about 5½ percent of GDP, after a sharp narrowing by 3 percentage points of GDP in 2015.
  - The positive dynamics in the balance of payments led to an increase in reserves to above 5 months of prospective imports.
  - The overall fiscal deficit narrowed from 8 percent of GDP in 2015 to close to 7 percent in 2016.
  - Kenya is supported by a two-year Stand-By Arrangement and a two-year arrangement under the Stand-By Credit Facility, which the authorities are treating as precautionary.
  - It is an IDA recipient with a low risk of debt distress.
- Assessment
  - Staff proposes maintaining Kenya PRGT eligibility given the presence of serious short-term vulnerabilities.
- Income Criterion
  - Kenya does not meet the income criterion for graduation. In 2015, Kenya’s GNI per capita was US$1,340, 43 percent below the relevant income graduation threshold.
- Market Access Criterion
  - Kenya meets the graduation criterion. It accessed international markets in all of the last five years in a cumulative amount of 642 percent of its IMF quota.
- Serious Short-Term Vulnerabilities
  - Kenya faces several significant downside risks to growth: if the current drought continues, it will hurt growth while fueling food price inflation.
  - Bank credit has slowed from 18 percent in 2015 to 4 percent in 2016, as interest rate caps have reduced bank profitability – putting downward pressure on private investment.
  - If second round effects from the spike in inflation materialize, this could require a monetary tightening, with negative growth implications.
  - The programmed fiscal consolidation in excess of 3 percent of GDP over the coming 3 years could dampen growth.
  - The national elections in August 2017 pose risks to economic policy implementation.
  - Other downside risks include a potential increase in the volatility of global capital flows and security threats. These risks, if materialized, could restrict the country’s ability to borrow from international markets.
  - As Kenya’s GNI per capita is currently only 13 percent above the relevant income entry threshold, negative shocks could lead to a decline below the threshold. Kenya has experienced episodes of significant GNI per capita volatility in the past.
  - In view of these developments, staff do not recommend graduation from PRGT eligibility at this time.

*International Monetary Fund — Eligibility to Use the Fund’s Facilities for Concessional Financing (excerpts).*

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_Source: https://www.imf.org/-/media/files/publications/pp/pp052317-eligibility-to-use-the-funds-facilities-for-concessional-financing-for-2017.pdf_