## _081809

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---

### Executive Summary — Key Findings and Status
- Total arrears to the Fund declined by SDR 11 million, to SDR 1,327 million, since the last review.
- Sudan’s payments in excess of its new obligations falling due accounted for the decline; arrears by Somalia and Zimbabwe increased further.
- The majority of the arrears to the Fund (85 percent) were to the General Resources Account (GRA).
- Three members remain in protracted arrears to the Fund—Somalia, Sudan, and Zimbabwe—and remedial measures are in place for all three cases.
- All overdue financial obligations to the Fund as of end-June 2009 were protracted arrears, with Sudan accounting for 75 percent of the total.
- Record of cooperation on policies and payments by the current protracted cases varied widely:
  - Somalia: Transitional Federal Government lacks international recognition; absence of internationally-recognized central government and official information precludes a full assessment of cooperation.
  - Sudan: Continued cooperation on policies and payments since last review; policy performance deteriorated significantly in the last quarter of 2008 due to sharp decline in oil prices; authorities indicated payments to the Fund in 2009 will be reduced to US$10 million (compared to US$50 million in 2008).
  - Zimbabwe: Arrears to the PRGF-ESF Trust have increased since last review, but cooperation on policies has improved significantly; Executive Board lifted suspension of Fund technical assistance in targeted areas in May 2009.
- No changes are proposed to the Fund’s strategy on arrears.
- Proposed extension: availability of the rights approach be extended by another year, to end-August 2010; rights approach remains an important option for the two eligible members (Somalia and Sudan).

### Introduction — Purpose and Scope
- Paper provides an update on progress under the Fund’s strengthened cooperative strategy on overdue financial obligations since the last review.
- Proposes to extend availability of the rights approach by another year, to end-August 2010.
- Sections covered:
  - Overview of overdue financial obligations through end-June 2009.
  - Developments in protracted arrears cases since last review.
  - Progress under the Fund’s strategy on arrears.

### Recent Developments — Overview (end-June 2009)
- Three members in protracted arrears as of end-June 2009:
  - Somalia: arrears dating back to mid-1980s; accounts for 18 percent of total arrears.
  - Sudan: arrears dating back to mid-1980s; accounts for 75 percent of total arrears.
  - Zimbabwe: in arrears to the PRGF-ESF Trust since February 2001; accounts for 7 percent of total arrears.
- Arrears by member (in millions of SDRs; as of end-June 2009):
  - Zimbabwe: 89
  - Somalia: 243
  - Sudan: 994
- Composition of total arrears (end-June 2009):
  - Total arrears: SDR 1,326.9 million (declined from SDR 1,338.0 million at end-June 2008)
  - Principal: SDR 447.3 million
    - GRA principal: SDR 299.0 million
    - PRGF-ESF Trust principal: SDR 73.8 million
    - Other principal (Trust Fund and SAF): SDR 74.5 million
  - Interest: SDR 879.6 million
    - GRA interest: SDR 826.0 million
    - PRGF-ESF Trust interest: SDR 15.6 million
    - Other interest (net SDR charges, member assessments, Trust Fund and SAF charges/interest): SDR 38.0 million
- Burden-sharing and deferred charges:
  - Total burden-shared deferred charges amounted to SDR 692 million as of end-June 2009, an increase of SDR 7.5 million from a year ago.
  - Arrears to the Trust Fund: SDR 88 million.
  - SDR 74.5 million has been drawn from the Reserve Account to repay PRGF-ESF Trust lenders.
- Short-term arrears:
  - Four members (four instances) incurred short-term arrears (less than six months) during the period under review; these arrears were settled before remedial measures were applied.
- Arrears to other international financial institutions (as of end-June 2009; in millions of SDRs):
  - Protracted-arrears countries’ arrears to the World Bank: SDR 908.3 million
  - Protracted-arrears countries’ arrears to the African Development Bank Group (AfDB): SDR 493.0 million
  - Totals by country (Fund, World Bank, AfDB, Total):
    - Somalia: 243.1 ; 125.9 ; 49.2 ; 418.3
    - Sudan: 994.3 ; 342.2 ; 148.9 ; 1,485.4
    - Zimbabwe: 89.5 ; 440.2 ; 294.9 ; 824.6
- Overdue currency valuation adjustments:
  - Overdue currency valuation adjustments of 11 members amounted to SDR 1.2 billion at end-June 2009 (about the same amount as at end-June 2008).
  - Protracted arrears cases accounted for SDR 658.4 million, or 53 percent of the total amount.

### Recent Developments — Developments in Protracted Arrears Cases
- Sudan:
  - Continued cooperation on policies and payments.
  - Hard hit by global crisis due to sharp decline in oil revenues; foreign reserves fell sharply to less than two weeks of imports at end-March 2009.
  - Authorities agreed to an 18-month staff-monitored program (SMP).
  - Payments: Sudan paid US$50 million (equivalent to SDR 32 million) in 2008 versus new obligations falling due of SDR 11.5 million.
  - In 2009, Sudan made three payments totaling US$5.6 million (equivalent to SDR 3.7 million).
  - Authorities indicated intention to reduce payments to US$10 million in 2009, with significant increases in 2010 as reserves improve.
  - Executive Board reviewed arrears and Managing Director’s complaint in November 2008; next review extended to no later than August 26, 2009.
- Zimbabwe:
  - Executive Board reviewed overdue obligations to PRGF-ESF Trust in January 2009; remedial measures remained in place.
  - May 2009: Executive Board lifted suspension of Fund technical assistance in targeted areas.
  - Cooperation on policies improved significantly; cooperation on payments remained poor.
  - Economic and social indicators worsened significantly; acute and ongoing humanitarian crisis noted.
  - Directors welcomed Short-Term Emergency Recovery Program (STERP) and emphasized need for fiscal discipline, elimination of quasi-fiscal activities, maintenance of multi-currency monetary framework, and acceleration of structural reforms.
  - Payments since last review: two payments totaling SDR 0.44 million.
  - April 2009: authorities committed to regular payments of about US$100,000 per quarter starting July 2009; no such payments received to date.
- Somalia:
  - Executive Board has postponed its review of Somalia’s overdue financial obligations since October 1990.
  - No basis for assessing cooperation due to continuous political and security problems and lack of official information.
  - Transitional Federal Government formed in 2005 has been unable to restore order and lacks international recognition.
  - Staff continues to monitor developments and stands ready to re-engage should conditions permit.

### Progress under the Fund’s Arrears Strategy and Policy Issues
- Strategy assessment:
  - The Fund’s strategy on arrears has been broadly effective in dealing with cases to date; no changes are proposed.
  - Strategy elements: prevention; intensified collaboration (including the rights approach); remedial measures.
  - Preventive element has generally worked well in avoiding new arrears or bringing about quick clearance.
  - Timetables for remedial measures for the General and SDR Departments and the PRGF-ESF Trust provided in Annexes I and II (in source document).
- Rights approach:
  - Rights approach remains an important option for arrears clearance for the two eligible members (Somalia and Sudan).
  - Rights approach initiated in 1990; used to clear arrears of Peru, Sierra Leone, and Zambia in the 1990s.
  - Eligibility restricted to the eleven members that had protracted arrears at end-1989; only Somalia and Sudan remain eligible.
  - Under the rights approach, an eligible member must establish a track record of cooperation on policies with the Fund by undertaking an economic program with conditionality equivalent to upper credit tranche Fund arrangements and make payments at a minimum sufficient to meet new obligations falling due; rights accumulate to future drawings following clearance of arrears; bilateral creditors provide a bridge loan to clear arrears, followed by access to new Fund financing.
  - Proposal: extend availability of the rights approach for another year, to end-August 2010.
- Issues related to forthcoming SDR allocations:
  - Recently approved general allocation of SDRs will have implications for members with overdue financial obligations.
  - Participants in the SDR Department that are in arrears to the Fund in either the General Department, the SDR Department, or to the Fund as trustee, are eligible to receive SDRs allocated to them on the same basis as all other participants.
  - Under Article XX, Section 5, SDRs allocated to participants with overdue charges in the SDR Department shall be immediately applied against such unpaid charges and cancelled (up to the extent of such charges).
  - In the forthcoming general SDR allocation, allocations are:
    - Somalia: SDR 32.8 million
    - Sudan: SDR 125.8 million
    - Zimbabwe: SDR 262.0 million
  - Somalia is the only member with overdue charges to the SDR Department; about SDR 14.1 million would be automatically applied to settle its overdue charges and assessments.
  - Some Directors stressed that members with arrears to the Fund (GRA and PRGF-ESF Trust) should use their SDR allocation to retire these overdue obligations.
  - Staff will explore with authorities how SDRs received in the general allocation will be used and encourage strengthening reserve positions and clearing arrears at an appropriate time.

### Special SDR allocation under the Fourth Amendment
- Allocations under the special SDR allocation pursuant to the Fourth Amendment of the Articles of Agreement:
  - Somalia: SDR 4.2 million
  - Sudan: SDR 16.1 million
  - Zimbabwe: SDR 66.4 million
- SDRs allocated under the Fourth Amendment to a participant with overdue obligations to the Fund would not be made available to the participant; these SDRs will be deposited and held in an escrow account in the SDR Department and would be released to the participant only upon the discharge of all such overdue obligations to the Fund.
- Therefore, Somalia, Sudan and Zimbabwe will not have access to the SDRs allocated to them under the special allocation until they clear their arrears to the Fund.
- Note: In accordance with Article XX, section 5, about SDR 14.1 million would be automatically applied to settle Somalia’s overdue charges. Somalia also has overdue SDR Department assessments and, pursuant to Rule T-2, SDR 33,804 will be debited from its SDR account and applied in settlement of such assessments.

### Countries with protracted arrears — key indebtedness figures (as of end-June 2009)
- Somalia:
  - Total Indebtedness (SDR millions): 243.1
  - Of which: Overdue Principal: 112.0; Interest: 131.1; Total Overdue: 243.1
- Sudan:
  - Total Indebtedness (SDR millions): 994.3
  - Of which: Overdue Principal: 261.5; Interest: 732.8; Total Overdue: 994.3
- Zimbabwe:
  - Total Indebtedness (SDR millions): 89.5
  - Of which: Overdue Principal: 73.8; Interest: 15.6; Total Overdue: 89.5
- Total (Somalia + Sudan + Zimbabwe):
  - Total Indebtedness (SDR millions): 1,326.9
  - Of which: Overdue Principal: 447.3; Interest: 879.6; Total Overdue: 1,326.9

### Financial obligations falling due and payments to the Fund by current protracted arrears cases, 1999–Jan–Jun 2009 (In millions of SDRs)
- Obligations falling due (selected years):
  - 1999: Somalia 4.6; Sudan 21.1; Zimbabwe 51.9; Total 77.6
  - 2000: Somalia 5.9; Sudan 25.4; Zimbabwe 61.4; Total 92.7
  - 2001: Somalia 5.4; Sudan 21.1; Zimbabwe 73.3; Total 99.9
  - 2002: Somalia 3.4; Sudan 12.3; Zimbabwe 78.5; Total 94.3
  - 2003: Somalia 2.7; Sudan 9.7; Zimbabwe 50.8; Total 63.2
  - 2004: Somalia 3.0; Sudan 9.9; Zimbabwe 29.2; Total 42.2
  - 2005: Somalia 4.1; Sudan 12.8; Zimbabwe 10.8; Total 27.7
  - 2006: Somalia 5.7; Sudan 16.5; Zimbabwe 3.9; Total 26.0
  - 2007: Somalia 6.4; Sudan 16.9; Zimbabwe 3.9; Total 27.1
  - 2008: Somalia 4.9; Sudan 11.5; Zimbabwe 2.6; Total 19.0
  - Jan.–Jun. 2009: Somalia 1.0; Sudan 2.2; Zimbabwe 0.3; Total 3.5
- Payments made to the Fund (selected years):
  - 1999: Somalia --; Sudan 29.4; Zimbabwe 51.9; Total 81.3
  - 2000: Somalia --; Sudan 43.3; Zimbabwe 61.4; Total 104.7
  - 2001: Somalia --; Sudan 43.1; Zimbabwe 9.2; Total 52.3
  - 2002: Somalia --; Sudan 18.2; Zimbabwe 2.5; Total 20.7
  - 2003: Somalia --; Sudan 19.6; Zimbabwe 3.4; Total 23.0
  - 2004: Somalia --; Sudan 21.8; Zimbabwe 14.3; Total 36.1
  - 2005: Somalia --; Sudan 20.5; Zimbabwe 111.7; Total 132.2
  - 2006: Somalia --; Sudan 20.1; Zimbabwe 18.4; Total 38.5
  - 2007: Somalia --; Sudan 41.4; Zimbabwe 0.7; Total 42.1
  - 2008: Somalia --; Sudan 37.4; Zimbabwe 0.4; Total 37.7
  - Jan.–Jun. 2009: Somalia --; Sudan 2.3; Zimbabwe 0.0/2.4 3/ (note: 3/ Less than SDR 50,000)
- Payments made as percent of obligations falling due (selected years):
  - 1999: Somalia --; Sudan 139.3; Zimbabwe 100.0; Total 104.8
  - 2000: Somalia --; Sudan 170.8; Zimbabwe 100.0; Total 113.0
  - 2001: Somalia --; Sudan 204.1; Zimbabwe 12.5; Total 52.3
  - 2002: Somalia --; Sudan 147.3; Zimbabwe 3.2; Total 22.0
  - 2003: Somalia --; Sudan 203.1; Zimbabwe 6.6; Total 36.4
  - 2004: Somalia --; Sudan 219.5; Zimbabwe 49.0; Total 85.6
  - 2005: Somalia --; Sudan 160.3; Zimbabwe 1,034.3; Total 477.7
  - 2006: Somalia --; Sudan 122.0; Zimbabwe 475.7; Total 148.0
  - 2007: Somalia --; Sudan 245.8; Zimbabwe 17.9; Total 155.4
  - 2008: Somalia --; Sudan 325.0; Zimbabwe 14.3; Total 198.9
  - Jan.–Jun. 2009: Somalia --; Sudan 106.2; Zimbabwe 16.3; Total 68.6

### Deferred GRA charges of countries with protracted arrears, FY 2005–10 (In millions of SDRs, as of June 30, 2009)
- Somalia:
  - Balance Apr. 30, 2005: 98.9
  - Net deferrals Apr. 30, 2006: 4.0 (Balance Apr. 30, 2006: 102.9)
  - Net deferrals Apr. 30, 2007: 5.1 (Balance Apr. 30, 2007: 108.0)
  - Net deferrals Apr. 30, 2008: 3.6 (Balance Apr. 30, 2008: 111.6)
  - Net deferrals Apr. 30, 2009: 3.4 (Balance Apr. 30, 2009: 115.0)
  - Net deferrals Jun. 30, 2009: 0.3 (Balance Jun. 30, 2009: 115.3)
- Sudan:
  - Balance Apr. 30, 2005: 665.6
  - Net deferrals Apr. 30, 2006: 12.5 (Balance Apr. 30, 2006: 678.1)
  - Net deferrals Apr. 30, 2007: 14.9 (Balance Apr. 30, 2007: 693.0)
  - Net deferrals Apr. 30, 2008: 10.0 (Balance Apr. 30, 2008: 703.0)
  - Net deferrals Apr. 30, 2009: 7.8 (Balance Apr. 30, 2009: 710.8)
  - Net deferrals Jun. 30, 2009: 0.8 (Balance Jun. 30, 2009: 711.6)
- Zimbabwe:
  - Balance Apr. 30, 2005: 14.3; Net deferrals: - ; subsequent balances and net deferrals not recorded in table (blanks shown).
- Total:
  - Balance Apr. 30, 2005: 778.8; Net deferrals 16.5; Balance Apr. 30, 2006: 781.0
  - Net deferrals Apr. 30, 2007: 20.0; Balance Apr. 30, 2007: 801.0
  - Net deferrals Apr. 30, 2008: 13.6; Balance Apr. 30, 2008: 814.6
  - Net deferrals Apr. 30, 2009: 11.2; Balance Apr. 30, 2009: 825.8
  - Net deferrals Jun. 30, 2009: 1.1; Balance Jun. 30, 2009: 826.9

### Countries with overdue currency valuation adjustments (In millions of SDRs; as of end-June 2009)
- Angola: 225.9
- Burundi: 6.3
- Congo, Dem. Rep. of: 279.2
- Marshall Islands: 0.2
- Micronesia: 0.3
- Palau: 0.3
- Rwanda: 1.7
- Samoa: 1.1
- Somalia 2/: 136.1 (Adjustments have been outstanding since the end of FY 1991.)
- Sudan 3/: 522.3 (Adjustments have been outstanding since the end of FY 1996.)
- Suriname 4/: 74.7 (Adjustments have been outstanding since the end of FY 1999.)
- Total: 1,248.1

### Timetable of remedial measures for overdue financial obligations to the General Department and the SDR Department (Annex I) — key actions and timing
- Immediately:
  - Staff sends a cable urging prompt payment; followed up through the concerned Executive Director.
  - The member is not permitted any use of the Fund’s resources nor is any request for the use of Fund resources placed before the Executive Board until the arrears are cleared.
- 2 weeks:
  - Management sends a communication to the Governor stressing seriousness and urging full and prompt settlement.
- 1 month:
  - The Managing Director notifies the Executive Board that an obligation is overdue.
- 6 weeks:
  - The Managing Director notifies the member that unless overdue obligations are settled promptly a complaint will be issued to the Executive Board; may recommend communications to selected or all Fund Governors.
- 2 months:
  - A complaint regarding the member’s overdue obligations is issued by the Managing Director to the Executive Board.
- 3 months:
  - A brief factual statement noting the existence and amount of arrears is posted on the Fund’s external website; indicates access to Fund resources is suspended for as long as arrears remain outstanding.
  - The complaint is given substantive consideration by the Executive Board; Board decision may limit use of general resources and, if overdue SDR obligations are involved, suspend right to use SDRs. A press release is issued following such decisions.
- 6–12 months:
  - The Executive Board will review its decision on limitation within three months, with the possibility of a second review; declaration of ineligibility may be considered to take effect not more than twelve months after emergence of arrears.
  - Sending communications to all Fund Governors and heads of selected international financial institutions regarding continued failure to fulfill obligations is to be considered.
- Up to 15 months:
  - A declaration of noncooperation will be considered within three months after dispatch of communications; upon declaration, technical assistance will be suspended unless the Executive Board decides otherwise.
- Up to 18 months:
  - A decision on suspension of voting and representation rights will be considered within three months after the declaration of noncooperation.
- Up to 24 months:
  - The procedure on compulsory withdrawal will be initiated within six months after the decision on suspension.

### Timetable of remedial measures for overdue obligations to the PRGF and ESF Trusts (Annex II) — key actions and timing
- Immediately:
  - Staff sends a cable urging prompt payment; the member’s access to Fund resources, including Trust resources, is suspended.
- 2 weeks:
  - Management sends a communication to the Governor stressing seriousness and urging full and prompt settlement to the Trust.
- 1 month:
  - The Managing Director notifies the Executive Board that an obligation to the Trust is overdue.
- 6 weeks:
  - The Managing Director notifies the member that unless overdue obligations are settled promptly, a report concerning the arrears to the Trust will be issued to the Executive Board; may recommend communications to selected or all Fund Governors.
- 2 months:
  - A report is issued by the Managing Director to the Executive Board requesting that the Board limit the member’s use of PRGF-ESF Trust Resources.
- 3 months:
  - The report is given substantive consideration by the Executive Board. A factual statement noting the existence and amount of arrears is posted on the member’s country-specific page on the Fund’s external website; indicates access to Fund resources is suspended until arrears are cleared. A press release is issued following the Board’s decision.
- 6 months:
  - The Executive Board reviews its decision on limitation and may remove the member from the list of PRGF-ESF-eligible countries; reinstatement requires a new Board decision.
- 12 months:
  - A declaration of noncooperation with the PRGF-ESF Trust may be issued by the Executive Board depending on assessment; upon declaration, technical assistance could be suspended. The Managing Director may also limit technical assistance if it is judged not to contribute adequately to resolving overdue issues.

*Source: Executive Summary (content unit), IMF document as provided.*

### Executive Summary ......................................................................................................

### _081809 - Executive Summary ......................................................................................................

### Executive Summary — Key Findings and Status
- Total arrears to the Fund declined by SDR 11 million, to SDR 1,327 million, since the last review.
- Sudan’s payments in excess of its new obligations falling due accounted for the decline; arrears by Somalia and Zimbabwe increased further.
- The majority of the arrears to the Fund (85 percent) were to the General Resources Account (GRA).
- Three members remain in protracted arrears to the Fund—Somalia, Sudan, and Zimbabwe—and remedial measures are in place for all three cases.
- All overdue financial obligations to the Fund as of end-June 2009 were protracted arrears, with Sudan accounting for 75 percent of the total.
- Record of cooperation on policies and payments by the current protracted cases varied widely:
  - Somalia: Transitional Federal Government lacks international recognition; absence of internationally-recognized central government and official information precludes a full assessment of cooperation.
  - Sudan: Continued cooperation on policies and payments since last review; policy performance deteriorated significantly in the last quarter of 2008 due to sharp decline in oil prices; authorities indicated payments to the Fund in 2009 will be reduced to US$10 million (compared to US$50 million in 2008).
  - Zimbabwe: Arrears to the PRGF-ESF Trust have increased since last review, but cooperation on policies has improved significantly; Executive Board lifted suspension of Fund technical assistance in targeted areas in May 2009.
- No changes are proposed to the Fund’s strategy on arrears.
- Proposed extension: availability of the rights approach be extended by another year, to end-August 2010; rights approach remains an important option for the two eligible members (Somalia and Sudan).

### Introduction — Purpose and Scope
- Paper provides an update on progress under the Fund’s strengthened cooperative strategy on overdue financial obligations since the last review.
- Proposes to extend availability of the rights approach by another year, to end-August 2010.
- Sections:
  - Overview of overdue financial obligations through end-June 2009.
  - Developments in protracted arrears cases since last review.
  - Progress under the Fund’s strategy on arrears.

### Recent Developments — Overview (end-June 2009)
- Three members in protracted arrears as of end-June 2009.
  - Somalia: arrears dating back to mid-1980s; accounts for 18 percent of total arrears.
  - Sudan: arrears dating back to mid-1980s; accounts for 75 percent of total arrears.
  - Zimbabwe: in arrears to the PRGF-ESF Trust since February 2001; accounts for 7 percent of total arrears.
- Arrears by member (in millions of SDRs; as of end-June 2009):
  - Zimbabwe: 89
  - Somalia: 243
  - Sudan: 994
- Composition of total arrears (end-June 2009):
  - Total arrears: SDR 1,326.9 million (declined from SDR 1,338.0 million at end-June 2008)
  - Principal: SDR 447.3 million
    - GRA principal: SDR 299.0 million
    - PRGF-ESF Trust principal: SDR 73.8 million
    - Other principal (Trust Fund and SAF): SDR 74.5 million
  - Interest: SDR 879.6 million
    - GRA interest: SDR 826.0 million
    - PRGF-ESF Trust interest: SDR 15.6 million
    - Other interest (net SDR charges, member assessments, Trust Fund and SAF charges/interest): SDR 38.0 million
- Burden-sharing and deferred charges:
  - Total burden-shared deferred charges amounted to SDR 692 million as of end-June 2009, an increase of SDR 7.5 million from a year ago.
  - Arrears to the Trust Fund: SDR 88 million.
  - SDR 74.5 million has been drawn from the Reserve Account to repay PRGF-ESF Trust lenders.
- Short-term arrears:
  - Four members (four instances) incurred short-term arrears (less than six months) during the period under review; these arrears were settled before remedial measures were applied.
- Arrears to other international financial institutions (as of end-June 2009; in millions of SDRs):
  - Protracted-arrears countries’ arrears to the World Bank: SDR 908.3 million
  - Protracted-arrears countries’ arrears to the African Development Bank Group (AfDB): SDR 493.0 million
  - Totals by country (Fund, World Bank, AfDB, Total):
    - Somalia: 243.1 ; 125.9 ; 49.2 ; 418.3
    - Sudan: 994.3 ; 342.2 ; 148.9 ; 1,485.4
    - Zimbabwe: 89.5 ; 440.2 ; 294.9 ; 824.6
- Overdue currency valuation adjustments:
  - Overdue currency valuation adjustments of 11 members amounted to SDR 1.2 billion at end-June 2009 (about the same amount as at end-June 2008).
  - Protracted arrears cases accounted for SDR 658.4 million, or 53 percent of the total amount.

### Recent Developments — Developments in Protracted Arrears Cases
- Sudan:
  - Continued cooperation on policies and payments.
  - Hard hit by global crisis due to sharp decline in oil revenues; foreign reserves fell sharply to less than two weeks of imports at end-March 2009.
  - Authorities agreed to an 18-month staff-monitored program (SMP).
  - Payments: Sudan paid US$50 million (equivalent to SDR 32 million) in 2008 versus new obligations falling due of SDR 11.5 million.
  - In 2009, Sudan made three payments totaling US$5.6 million (equivalent to SDR 3.7 million).
  - Authorities indicated intention to reduce payments to US$10 million in 2009, with significant increases in 2010 as reserves improve.
  - Executive Board reviewed arrears and Managing Director’s complaint in November 2008; next review extended to no later than August 26, 2009.
- Zimbabwe:
  - Executive Board reviewed overdue obligations to PRGF-ESF Trust in January 2009; remedial measures remained in place.
  - May 2009: Executive Board lifted suspension of Fund technical assistance in targeted areas.
  - Cooperation on policies improved significantly; cooperation on payments remained poor.
  - Economic and social indicators worsened significantly; acute and ongoing humanitarian crisis noted.
  - Directors welcomed Short-Term Emergency Recovery Program (STERP) and emphasized need for fiscal discipline, elimination of quasi-fiscal activities, maintenance of multi-currency monetary framework, and acceleration of structural reforms.
  - Payments since last review: two payments totaling SDR 0.44 million.
  - April 2009: authorities committed to regular payments of about US$100,000 per quarter starting July 2009; no such payments received to date.
- Somalia:
  - Executive Board has postponed its review of Somalia’s overdue financial obligations since October 1990.
  - No basis for assessing cooperation due to continuous political and security problems and lack of official information.
  - Transitional Federal Government formed in 2005 has been unable to restore order and lacks international recognition.
  - Staff continues to monitor developments and stands ready to re-engage should conditions permit.

### Progress under the Fund’s Arrears Strategy and Policy Issues
- Strategy assessment:
  - The Fund’s strategy on arrears has been broadly effective in dealing with cases to date; no changes are proposed.
  - Strategy elements: prevention; intensified collaboration (including the rights approach); remedial measures.
  - Preventive element has generally worked well in avoiding new arrears or bringing about quick clearance.
  - Timetables for remedial measures for the General and SDR Departments and the PRGF-ESF Trust provided in Annexes I and II (in source document).
- Rights approach:
  - Rights approach remains an important option for arrears clearance for the two eligible members (Somalia and Sudan).
  - Rights approach initiated in 1990; used to clear arrears of Peru, Sierra Leone, and Zambia in the 1990s.
  - Eligibility restricted to the eleven members that had protracted arrears at end-1989; only Somalia and Sudan remain eligible.
  - Under the rights approach, an eligible member must establish a track record of cooperation on policies with the Fund by undertaking an economic program with conditionality equivalent to upper credit tranche Fund arrangements and make payments at a minimum sufficient to meet new obligations falling due; rights accumulate to future drawings following clearance of arrears; bilateral creditors provide a bridge loan to clear arrears, followed by access to new Fund financing.
  - Proposal: extend availability of the rights approach for another year, to end-August 2010.
- Issues related to forthcoming SDR allocations:
  - Recently approved general allocation of SDRs will have implications for members with overdue financial obligations.
  - Participants in the SDR Department that are in arrears to the Fund in either the General Department, the SDR Department, or to the Fund as trustee, are eligible to receive SDRs allocated to them on the same basis as all other participants.
  - Under Article XX, Section 5, SDRs allocated to participants with overdue charges in the SDR Department shall be immediately applied against such unpaid charges and cancelled (up to the extent of such charges).
  - In the forthcoming general SDR allocation, allocations are:
    - Somalia: SDR 32.8 million
    - Sudan: SDR 125.8 million
    - Zimbabwe: SDR 262.0 million
  - Somalia is the only member with overdue charges to the SDR Department; about SDR 14.1 million would be automatically applied to settle its overdue charges and assessments.
  - Some Directors stressed that members with arrears to the Fund (GRA and PRGF-ESF Trust) should use their SDR allocation to retire these overdue obligations.
  - Staff will explore with authorities how SDRs received in the general allocation will be used and encourage strengthening reserve positions and clearing arrears at an appropriate time.

*Source: Executive Summary (content unit), IMF document as provided.*

### 17.      Under the special SDR allocation pursuant to the Fourth Amendment of the

### _081809 - 17.      Under the special SDR allocation pursuant to the Fourth Amendment of the

### Special SDR allocation under the Fourth Amendment
- Somalia will be allocated SDR 4.2 million under the special SDR allocation pursuant to the Fourth Amendment of the Articles of Agreement.
- Sudan will be allocated SDR 16.1 million under the special SDR allocation pursuant to the Fourth Amendment of the Articles of Agreement.
- Zimbabwe will be allocated SDR 66.4 million under the special SDR allocation pursuant to the Fourth Amendment of the Articles of Agreement.
- SDRs allocated under the Fourth Amendment to a participant with overdue obligations to the Fund would not be made available to the participant; these SDRs will be deposited and held in an escrow account in the SDR Department and would be released to the participant only upon the discharge of all such overdue obligations to the Fund.
- Therefore, Somalia, Sudan and Zimbabwe will not have access to the SDRs allocated to them under the special allocation until they clear their arrears to the Fund.
- Note: In accordance with Article XX, section 5, about SDR 14.1 million would be automatically applied to settle its overdue charges. Somalia also has overdue SDR Department assessments and, pursuant to Rule T-2, SDR 33,804 will be debited from its SDR account and applied in settlement of such assessments.

### Countries with protracted arrears — key indebtedness figures (as of end-June 2009)
- Somalia: Total Indebtedness (SDR millions) 243.1; Of which: Overdue Principal 112.0; Interest 131.1; Total Overdue 243.1.
- Sudan: Total Indebtedness (SDR millions) 994.3; Of which: Overdue Principal 261.5; Interest 732.8; Total Overdue 994.3.
- Zimbabwe: Total Indebtedness (SDR millions) 89.5; Of which: Overdue Principal 73.8; Interest 15.6; Total Overdue 89.5.
- Total (Somalia + Sudan + Zimbabwe): Total Indebtedness (SDR millions) 1,326.9; Of which: Overdue Principal 447.3; Interest 879.6; Total Overdue 1,326.9.

### Financial obligations falling due and payments to the Fund by current protracted arrears cases, 1999–Jan–Jun 2009 (In millions of SDRs)
- Obligations falling due (selected years indicated):
  - 1999: Somalia 4.6; Sudan 21.1; Zimbabwe 51.9; Total 77.6.
  - 2000: Somalia 5.9; Sudan 25.4; Zimbabwe 61.4; Total 92.7.
  - 2001: Somalia 5.4; Sudan 21.1; Zimbabwe 73.3; Total 99.9.
  - 2002: Somalia 3.4; Sudan 12.3; Zimbabwe 78.5; Total 94.3.
  - 2003: Somalia 2.7; Sudan 9.7; Zimbabwe 50.8; Total 63.2.
  - 2004: Somalia 3.0; Sudan 9.9; Zimbabwe 29.2; Total 42.2.
  - 2005: Somalia 4.1; Sudan 12.8; Zimbabwe 10.8; Total 27.7.
  - 2006: Somalia 5.7; Sudan 16.5; Zimbabwe 3.9; Total 26.0.
  - 2007: Somalia 6.4; Sudan 16.9; Zimbabwe 3.9; Total 27.1.
  - 2008: Somalia 4.9; Sudan 11.5; Zimbabwe 2.6; Total 19.0.
  - Jan.–Jun. 2009: Somalia 1.0; Sudan 2.2; Zimbabwe 0.3; Total 3.5.
- Payments made to the Fund (selected years indicated):
  - 1999: Somalia --; Sudan 29.4; Zimbabwe 51.9; Total 81.3.
  - 2000: Somalia --; Sudan 43.3; Zimbabwe 61.4; Total 104.7.
  - 2001: Somalia --; Sudan 43.1; Zimbabwe 9.2; Total 52.3.
  - 2002: Somalia --; Sudan 18.2; Zimbabwe 2.5; Total 20.7.
  - 2003: Somalia --; Sudan 19.6; Zimbabwe 3.4; Total 23.0.
  - 2004: Somalia --; Sudan 21.8; Zimbabwe 14.3; Total 36.1.
  - 2005: Somalia --; Sudan 20.5; Zimbabwe 111.7; Total 132.2.
  - 2006: Somalia --; Sudan 20.1; Zimbabwe 18.4; Total 38.5.
  - 2007: Somalia --; Sudan 41.4; Zimbabwe 0.7; Total 42.1.
  - 2008: Somalia --; Sudan 37.4; Zimbabwe 0.4; Total 37.7.
  - Jan.–Jun. 2009: Somalia --; Sudan 2.3; Zimbabwe 0.0/2.4 3/ (note: 3/ Less than SDR 50,000).

- Payments made as percent of obligations falling due (selected years indicated):
  - 1999: Somalia --; Sudan 139.3; Zimbabwe 100.0; Total 104.8.
  - 2000: Somalia --; Sudan 170.8; Zimbabwe 100.0; Total 113.0.
  - 2001: Somalia --; Sudan 204.1; Zimbabwe 12.5; Total 52.3.
  - 2002: Somalia --; Sudan 147.3; Zimbabwe 3.2; Total 22.0.
  - 2003: Somalia --; Sudan 203.1; Zimbabwe 6.6; Total 36.4.
  - 2004: Somalia --; Sudan 219.5; Zimbabwe 49.0; Total 85.6.
  - 2005: Somalia --; Sudan 160.3; Zimbabwe 1,034.3; Total 477.7.
  - 2006: Somalia --; Sudan 122.0; Zimbabwe 475.7; Total 148.0.
  - 2007: Somalia --; Sudan 245.8; Zimbabwe 17.9; Total 155.4.
  - 2008: Somalia --; Sudan 325.0; Zimbabwe 14.3; Total 198.9.
  - Jan.–Jun. 2009: Somalia --; Sudan 106.2; Zimbabwe 16.3; Total 68.6.

### Deferred GRA charges of countries with protracted arrears, FY 2005–10 (In millions of SDRs, as of June 30, 2009)
- Somalia:
  - Balance Apr. 30, 2005: 98.9
  - Net deferrals Apr. 30, 2006: 4.0 (Balance Apr. 30, 2006: 102.9)
  - Net deferrals Apr. 30, 2007: 5.1 (Balance Apr. 30, 2007: 108.0)
  - Net deferrals Apr. 30, 2008: 3.6 (Balance Apr. 30, 2008: 111.6)
  - Net deferrals Apr. 30, 2009: 3.4 (Balance Apr. 30, 2009: 115.0)
  - Net deferrals Jun. 30, 2009: 0.3 (Balance Jun. 30, 2009: 115.3)
- Sudan:
  - Balance Apr. 30, 2005: 665.6
  - Net deferrals Apr. 30, 2006: 12.5 (Balance Apr. 30, 2006: 678.1)
  - Net deferrals Apr. 30, 2007: 14.9 (Balance Apr. 30, 2007: 693.0)
  - Net deferrals Apr. 30, 2008: 10.0 (Balance Apr. 30, 2008: 703.0)
  - Net deferrals Apr. 30, 2009: 7.8 (Balance Apr. 30, 2009: 710.8)
  - Net deferrals Jun. 30, 2009: 0.8 (Balance Jun. 30, 2009: 711.6)
- Zimbabwe:
  - Balance Apr. 30, 2005: 14.3; Net deferrals: - ; subsequent balances and net deferrals not recorded in table (blanks shown).
- Total:
  - Balance Apr. 30, 2005: 778.8; Net deferrals 16.5; Balance Apr. 30, 2006: 781.0
  - Net deferrals Apr. 30, 2007: 20.0; Balance Apr. 30, 2007: 801.0
  - Net deferrals Apr. 30, 2008: 13.6; Balance Apr. 30, 2008: 814.6
  - Net deferrals Apr. 30, 2009: 11.2; Balance Apr. 30, 2009: 825.8
  - Net deferrals Jun. 30, 2009: 1.1; Balance Jun. 30, 2009: 826.9

### Countries with overdue currency valuation adjustments (In millions of SDRs; as of end-June 2009)
- Angola: 225.9
- Burundi: 6.3
- Congo, Dem. Rep. of: 279.2
- Marshall Islands: 0.2
- Micronesia: 0.3
- Palau: 0.3
- Rwanda: 1.7
- Samoa: 1.1
- Somalia 2/: 136.1 (Adjustments have been outstanding since the end of FY 1991.)
- Sudan 3/: 522.3 (Adjustments have been outstanding since the end of FY 1996.)
- Suriname 4/: 74.7 (Adjustments have been outstanding since the end of FY 1999.)
- Total: 1,248.1

### Timetable of remedial measures for overdue financial obligations to the General Department and the SDR Department (Annex I) — key actions and timing
- Immediately:
  - Staff sends a cable urging prompt payment; followed up through the concerned Executive Director.
  - The member is not permitted any use of the Fund’s resources nor is any request for the use of Fund resources placed before the Executive Board until the arrears are cleared.
- 2 weeks:
  - Management sends a communication to the Governor stressing seriousness and urging full and prompt settlement.
- 1 month:
  - The Managing Director notifies the Executive Board that an obligation is overdue.
- 6 weeks:
  - The Managing Director notifies the member that unless overdue obligations are settled promptly a complaint will be issued to the Executive Board; may recommend communications to selected or all Fund Governors.
- 2 months:
  - A complaint regarding the member’s overdue obligations is issued by the Managing Director to the Executive Board.
- 3 months:
  - A brief factual statement noting the existence and amount of arrears is posted on the Fund’s external website; indicates access to Fund resources is suspended for as long as arrears remain outstanding.
  - The complaint is given substantive consideration by the Executive Board; Board decision may limit use of general resources and, if overdue SDR obligations are involved, suspend right to use SDRs. A press release is issued following such decisions.
- 6–12 months:
  - The Executive Board will review its decision on limitation within three months, with the possibility of a second review; declaration of ineligibility may be considered to take effect not more than twelve months after emergence of arrears.
  - Sending communications to all Fund Governors and heads of selected international financial institutions regarding continued failure to fulfill obligations is to be considered.
- Up to 15 months:
  - A declaration of noncooperation will be considered within three months after dispatch of communications; upon declaration, technical assistance will be suspended unless the Executive Board decides otherwise.
- Up to 18 months:
  - A decision on suspension of voting and representation rights will be considered within three months after the declaration of noncooperation.
- Up to 24 months:
  - The procedure on compulsory withdrawal will be initiated within six months after the decision on suspension.

### Timetable of remedial measures for overdue obligations to the PRGF and ESF Trusts (Annex II) — key actions and timing
- Immediately:
  - Staff sends a cable urging prompt payment; the member’s access to Fund resources, including Trust resources, is suspended.
- 2 weeks:
  - Management sends a communication to the Governor stressing seriousness and urging full and prompt settlement to the Trust.
- 1 month:
  - The Managing Director notifies the Executive Board that an obligation to the Trust is overdue.
- 6 weeks:
  - The Managing Director notifies the member that unless overdue obligations are settled promptly, a report concerning the arrears to the Trust will be issued to the Executive Board; may recommend communications to selected or all Fund Governors.
- 2 months:
  - A report is issued by the Managing Director to the Executive Board requesting that the Board limit the member’s use of PRGF-ESF Trust Resources.
- 3 months:
  - The report is given substantive consideration by the Executive Board. A factual statement noting the existence and amount of arrears is posted on the member’s country-specific page on the Fund’s external website; indicates access to Fund resources is suspended until arrears are cleared. A press release is issued following the Board’s decision.
- 6 months:
  - The Executive Board reviews its decision on limitation and may remove the member from the list of PRGF-ESF-eligible countries; reinstatement requires a new Board decision.
- 12 months:
  - A declaration of noncooperation with the PRGF-ESF Trust may be issued by the Executive Board depending on assessment; upon declaration, technical assistance could be suspended. The Managing Director may also limit technical assistance if it is judged not to contribute adequately to resolving overdue issues.

*Source: Finance Department; Fourth Amendment of the Articles of Agreement, Schedule M, paragraph 5; Annexes I and II as presented in the source content.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2009/_081809.pdf_