## The Flexible Credit Line (FCL) — _110209

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### Overview of the FCL: purpose, key features, and financial treatment
- Purpose and eligibility
  - Designed to provide a credit line with large and upfront financing to members with very strong fundamentals and institutional policy frameworks, and that have sustained track records of implementing very strong policies and remain committed to maintaining such policies in the future.
  - Access under the FCL is provided under an FCL arrangement.
  - Access to the FCL is available only to those members that meet strict qualification criteria; drawings under it are not tied to ex post conditionality.
  - The FCL can be used for either contingent (precautionary) and actual balance of payments (BoP) needs.

- Key features
  - Flexible terms:
    - i) access is uncapped and funds are available upfront;
    - ii) grace period and repayment terms are relatively long (3¼–5 years);
    - iii) renewals are unrestricted;
    - iv) the FCL can be used for either contingent (precautionary) and actual BoP needs.
  - Approval and length:
    - Arrangement approved following a confidential request; staff may assess qualification confidentially only if a country expresses interest.
    - The FCL may be a six-month arrangement or a one-year arrangement with a mid-term review (the choice is binary); for 12-month arrangements, no purchases can be made after six months until completion of an Executive Board mid-term review.
    - Successive arrangements may be approved provided qualification criteria continue to be met.
  - Access specifics:
    - Access under the FCL is uncapped and can be augmented (subject to Board approval) during the arrangement subject to continued eligibility.
    - Cumulative access under the FCL would not normally be expected by staff to exceed 1000 percent of quota.
    - The exceptional access policy does not apply to the FCL (i.e., lending above the normal access limits of 200 percent annually and 600 percent cumulative does not trigger the exceptional access policy), although approval procedures are substantively similar.
  - Conditionality and monitoring:
    - No traditional ex post conditionality or prior actions; qualification is based on track record and commitment.
    - No conditionality can be attached to the mid-term review or approval of successive arrangements.
    - Post program monitoring (PPM) is conducted while outstanding credit remains above 200 percent of quota if drawings occurred.
  - Phasing and use:
    - Entire requested access is available upon approval and remains available throughout the arrangement (subject to mid-term review for one-year arrangements).
    - Arrangement can be precautionary or for actual BoP need; member may draw in one or multiple purchases.
    - FCL expires upon earliest of: (i) expiration of its term; (ii) drawing of full approved access; or (iii) cancellation by the member.
  - Financial terms and reserves treatment:
    - Purchases under the FCL are subject to the same financial terms as SBAs.
    - Undrawn amounts are subject to the commitment fee.
    - Undrawn amounts available under the FCL arrangement are not counted in gross reserves; once drawn, FCL resources increase gross reserve assets and external liabilities corresponding to repurchase timing.

- Commitment fee specifics
  - Marginal commitment fee: 15 basis points for access up to 200 percent of quota, 30 basis points for access between 200 and 1000 percent of quota, and 60 basis points for access above 1000 percent of quota.
  - Example averages: the average commitment fee levied on a 500 (1000) percent of quota arrangement is 24 (27) basis points.
  - Commitment fee is levied upon approval and refunded pro rata if drawings are made or arrangement is cancelled without being drawn in full.

*Prepared by a team comprising Alison Stuart, Gustavo Adler, Manuela Goretti, Mercedes Vera Martin, and Manrique Saenz (all SPR), Ceda Ogada (LEG) and Marco Rossi (FIN), under the guidance of Lorenzo Giorgianni.*

### Process for requesting and approving an FCL arrangement
- Initial confidentiality and assessment
  - Member should approach staff or management confidentially; staff must treat requests as confidential and wait for formal expression of interest before assessment.
  - A mission is not required to discuss an FCL request; if the latest Article IV report is more than a year old or circumstances warrant it, a fact-finding visit may be needed.
  - Staff should encourage confidentiality to avoid negative market sentiment from failure to qualify.

- Preparatory steps and internal consultations
  - Area departments consult closely with SPR; a confidential preliminary assessment of qualification should be prepared.
  - Area teams consult early with SPR, FIN, LEG, and other functional departments to ensure thorough assessment.

- Support from other creditors and Board interactions
  - Consultation with other creditors expected when: (i) FCL requested on a nonprecautionary basis; and (ii) sizeable remaining financing gaps need to be filled by other creditors.
  - Management consults the Board informally with a concise staff note on qualification and proposed access; formal Board decision follows member’s written request, staff report assessing qualification and justifying access, and Managing Director’s recommendation.
  - Press releases may be issued cautiously if market-sensitive leaks are a concern; Managing Director generally will not recommend Board approval unless member consents to publication of the staff report.

- Authorities’ written communication and safeguards
  - Authorities’ written communication should describe macro conditions, broad policy goals and reasons for requesting Fund assistance; it is not a Letter of Intent for monitoring policy commitments.
  - Members requesting an FCL arrangement are not subject to the Fund’s policy on safeguards assessments but must authorize staff access to most recent annual independent audit of central bank financial statements and permit external auditors to discuss findings with staff.

- Circulation, activation, and disclosure
  - Normal circulation periods apply; expedited procedures are available for urgent cases or leak risks.
  - Credit line is open on approval; FIN needs authorization to debit member’s SDR account for the commitment fee upon approval.
  - For drawings, FIN requires official communication specifying purchase amount and representing a BoP need; members encouraged to disclose drawing information which the Fund routinely publishes.
  - Staff report and authorities’ written communication are expected to be published shortly after Board approval.

- Mid-term (six-month) review for 12-month arrangements
  - Six-month review required to assess continued adherence to qualification criteria; review should be completed by the Executive Board immediately prior to the lapse of the six-month period.
  - Staff prepare a concise staff report updating developments and assessing qualification; Board approval of the review could be on a lapse of time basis.
  - If very substantial changes in policy strategies or goals occurred, a new letter should be attached and discussed.

- Expiration communications
  - As arrangement nears expiration, staff or management could issue a factual press statement at member’s request highlighting recent performance and FCL role, coordinated with EXR and SPR.
  - Statements should not assess qualification for a successor arrangement; expressions of interest in successors are confidential.

### Core judgmental approach to qualification and criteria
- Core judgmental test (FCL decision, paragraph 2)
  - Qualification requires staff judgment assessing 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, providing confidence the member will respond appropriately to BoP difficulties.
  - Staff should indicate whether a very positive assessment of the member’s policies was given in the context of the most recent "2–3 years" Article IV consultations.

- Non-mechanical assessment
  - Qualification is not a tick-box exercise; Annex I criteria and indicators should be assessed but strong performance on all indicators is not necessary and mechanical meeting of most does not secure qualification.
  - Significant shortcomings on one or more criteria—unless offset by compensating factors or corrective policies—would generally signal non-qualification.

- Notification and confidentiality
  - If assessed not to qualify, the request remains confidential.
  - Board is notified only when management decides that access under the FCL may be appropriate.

- Justification of access (general Fund policy basis)
  - Access decisions should be based 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 capacity to repay the Fund, including the strength of its adjustment program and anticipated strengthening of the BoP by the time repurchases fall due; and
    - (iii) the member’s outstanding Fund credit and its record in using Fund resources.

### Qualification criteria and relevant indicators (Annex I highlights)
- Sustainable external position
  - Indicators: debt-stabilizing noninterest current account balance; level and composition of external debt; net international reserves; private sector external assets; assessments of exchange rate misalignment.
- Capital account dominated by private flows
  - Indicators: International Investment Position; composition of recent capital flows.
- Track record of sovereign access to capital markets at favorable terms
  - Indicators: EMBI spread; spread relative to EMBI overall index; current yield on benchmark bonds; credit ratings; last external issuance details.
- Reserve position for precautionary requests
  - Indicators: reserves relative to imports, short-term debt, monetary base, etc., as relevant to exchange rate regime.
- Sound public finances and sustainable public debt
  - Indicators: public sector debt-to-GDP; DSA; recent fiscal balances; structural fiscal balances; debt-stabilizing primary balance; quality of adjustment measures.
- Low and stable inflation within a sound monetary and exchange rate policy framework
  - Indicators: core and headline inflation trends; inflation expectations; adequacy of monetary policy tools; policy accountability and communication.
- Absence of bank solvency problems posing an imminent systemic threat
  - Indicators: deposits evolution; profitability; asset quality; capital adequacy; market, credit, and liquidity risk analyses (e.g., FSAPs).
- Effective financial sector supervision
  - Indicators: assessment of supervisory framework, legal/institutional framework, and operational capacity for interventions and emergency liquidity assistance.
- Data transparency and integrity
  - Indicators: subscription to the SDDS or satisfactory progress toward meeting it; routine Article IV assessments of data quality and integrity.

### Relevant indicator list (Table 1 — selected preserved items)
- Sustainable External Position: Gross external debt/GDP; 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.
- Capital account position: FDI plus portfolio inflows as share of total capital inflows; ratio of private holdings of external debt to gross external debt; private foreign holdings of domestic debt/total domestic debt.
- Sovereign market access: EMBI spread; spread between country EMBI and EMBI overall index; current yield on benchmark bonds; credit ratings; last external issuance.
- Reserve position (precautionary): ratio of reserves to short-term debt (remaining maturity), short-term debt plus current account deficit, imports, and broad money.
- Sound public finances: public sector debt-to-GDP, DSA; primary and overall fiscal balance (average for last 3/5 years); structural fiscal balances.
- Low and stable inflation: core and headline inflation and expectations; policy responses.
- Bank solvency: CAR and ROE; liquidity ratios; loan-to-deposit ratio; nonperforming loan ratios.
- Supervision: FSAP-based assessments; legal and institutional capacity for prompt corrective actions.
- Data transparency: SDDS subscription status; Article IV data quality assessments.

### Staff documentation and Board briefing (Annex II)
- Concise staff note for informal Board meeting should focus on:
  - Qualification: assessment of the three core elements and whether "2–3 years" Article IV consultations included very positive assessments; preliminary Annex I assessment.
  - Access: indication of appropriate access level and brief macro risk assessment.
  - Tables: standard economic indicators, balance of payments table (current year and following year), gross external financing requirements and sources under baseline and adverse scenario.
- Staff Report for the formal request should include:
  - Recent macro developments, outlook, authorities’ forward-looking policy plans.
  - Sources of BoP pressures and risks with alternative scenarios.
  - Detailed qualification assessment and debt sustainability analysis (DSA) with stress tests.
  - Justification of proposed access and assessment of capacity to repay under adverse contingencies.
  - Tables: selected indicators with projections, balance of payments (ideally five-year), external financing requirements and sources, fiscal projections, external and public DSA tables, capacity-to-repay table, and alternative access metrics.
  - Draft decision and FCL arrangement text prepared by LEG; FIN assessment of impact on Fund finances and liquidity; authorities’ written communication.
- Staff report for mid-term review should be concise and cover recent developments, role of FCL in dissipating tail risks, brief qualification review, staff appraisal, proposed decision to complete the review, and required tables; attach new authorities’ letter if strategies changed.

### Expedited procedures (Annex III)
- EFM procedures do not apply; FCL Decision sets its own expedited procedures.
- Expedited procedures may apply if crisis is imminent or underway, or fragile conditions and leak risks warrant rapid action.
- Possible timetable:
  - Documentation provided to Board at least "two hours" prior to informal meeting.
  - Formal Board meeting could consider the request within "48 to 72 hours" following circulation of staff reports.

### Framework for determining access in precautionary settings and operational guidance
- Aim: ensure Executive Board papers include rigorous analysis of access levels using consistent framework while allowing country-specific flexibility.
- Key criteria for access
  - Member’s actual or potential need for Fund resources, considering other financing and reserve desirability.
  - Member’s capacity to repay the Fund, including strength of adjustment program.
  - Member’s outstanding Fund credit and track record of using Fund resources.
- Framework elements
  - Construct a plausible adverse scenario to estimate potential financing gap and appropriate access.
  - Adverse scenario should be informed by:
    - Downside global assumptions aligned with latest WEO downside scenario (describe shock and attach probability).
    - Evidence from past and current crisis episodes.
    - Country-specific factors and past experience.
  - Consider orderly exchange rate adjustment and assess reserve coverage across multiple metrics.
  - Teams must ensure BoP tables demonstrate potential need.
  - Weight additional factors beyond adverse-scenario financing gap only with careful justification.
- Global assumptions and evidence
  - Use downside risks from the latest WEO, GFSR, and VEE; staff reports should indicate scenario used and attached probability.
  - If WEO/GFSR outdated, staff must justify alternative shocks.
  - Illustrative point: "the October 2009 WEO issue projected, in an adverse scenario, world real GDP growth to be 2.2 percentage points lower in 2010 (this scenario corresponds to the lower end of the 90 percent confidence interval surrounding the forecast baseline)."
- Reserves adequacy and additional considerations
  - Compare reserve levels across peers and metrics relevant to vulnerabilities and exchange rate regime (e.g., reserves-to-short term debt at remaining maturity plus current account deficit; reserves to imports coverage; reserves to M2).
  - If reserves are plentiful, staff may propose using reserves to cover part of financing gap implying lower FCL access; if reserves need to rise, staff may build increased reserve levels into baseline and adverse scenarios.
  - Access levels should be presented based on potential BoP need irrespective of specific use of Fund resources.
  - Verify appropriateness of access against a broad set of metrics: capacity to repay, quota, GDP, reserves, exports, imports, total debt stock, short-term external debt, M2 ratios, etc.

### Examples and illustrative access justifications (selected figures preserved)
- El Salvador (2009 precautionary SBA, 300 percent of quota)
  - Access based on three metrics: (i) potential withdrawal of 5 percent of total bank deposits combined with 50 percent rollover of short-term external credit; (ii) 10 percent of total bank deposits; (iii) access of this scale (with approved IADB credit line) sufficient to cover total bank capital.
- Brazil (2003 augmentation and extension of SBA, treated as precautionary; 355 percent of quota)
  - Access set so reserves could stand a shock of a three-month decline in rollover rates on external debt to 25 percent.
- Mexico’s FCL (1000 percent of quota)
  - Designed to insulate against potential global turbulence; adverse scenario generated an external financing shortfall of about $25−30 billion.
  - Access of 1,000 percent of quota would bring Mexico’s key reserve coverage ratios closer to key emerging market peers.
- Poland’s FCL (1000 percent of quota)
  - Baseline external financing requirement close to $106 billion for 2009, expected to be fully covered with small official reserve drawdown.
  - Adverse assumptions could produce a potential financing gap of about SDR12 billion (around $17.5 billion).
- Colombia’s FCL (SDR 7.0 billion, 900 percent of quota)
  - Baseline annual gross external financing needs for 2009 and 2010 estimated around $20 billion and fully financed; adverse external environment could create net financing needs of $6–8 billion during 2009–10.

- Poland — proposed access SDR13.69 billion (illustrative details)
  - Illustrative adverse scenario financing gap SDR11.6 billion (around $17.5 billion, 847 percent of quota).
  - Main assumptions: reduction in FDI of 15 percent versus 2009 baseline and about 45 percent versus 2008; equity portfolio outflows around 10 percent of total nonresident portfolio holdings; implied rollover rates around 80 percent of short-term debt at remaining maturity; other investment outflows (mostly nonresident deposits) of $2.5 billion; drawdown of private foreign assets for 10 percent of total liquid assets; no drawdown of official reserves.
  - Proposed access SDR13.69 billion allows cushion of about SDR2 billion.

- Colombia — proposed access SDR6,966 million (900 percent of quota)
  - Staff alternative scenario: ex ante external financing gap of $5.8 billion (502 percent of quota) in 2009 and $8.2 billion (about 709 percent of quota) in 2010.
  - Key assumptions: 20 percent decline in fuel prices and 10 percent decline in nonfuel commodity prices during 2009–10; further decline in FDI: 15 percent in 2009 and 10 percent in 2010; aggregate rollover rates of 85 percent in 2009 with lower rollover in 2010.
  - Adverse scenario does not include drawdown of nonresident holdings of domestic financial assets (about $4 billion) nor runs on bank deposits; proposed access builds in margin relative to weighted average of possible 2009–10 gaps.

- Access comparators (examples cited)
  - Poland proposed access: 13,690 (in millions of SDRs).
  - Mexico proposed access: 31,528 (in millions of SDRs).
  - Colombia proposed access: 6,966 (in millions of SDRs).
  - Arrangement comparator figures in table: 821,579 (in millions of SDRs); 20th Percentile: 13,291; 80th Percentile: 8,339; Average Median Percentile: 6,901. (Source: table in text.)

### Operational and analytic guidance (final points)
- Staff should construct adverse scenarios drawing on WEO, GFSR, VEE, and past crisis evidence; indicate scenario and attached probability.
- Present access based on potential BoP need and ensure BoP tables display projected need.
- Use a broad set of metrics to cross-check access appropriateness, including capacity to repay and quota comparisons.
- SPR reviewers and the Emerging Markets Division provide further guidance; see Annex II of GRA Lending Toolkit and Conditionality—Reform Proposals for more detail.

*Source: _110209 — The Flexible Credit Line (FCL) and Determining qualification; Annexes I–IV, II, III, IV.*

### 1.      The Flexible Credit Line (FCL) was introduced as part of a package of reforms to the

### The Flexible Credit Line (FCL) was introduced as part of a package of reforms to the

### Overview of the FCL
- Purpose and eligibility
  - Designed to provide a credit line with large and upfront financing to members with very strong fundamentals and institutional policy frameworks, and that have sustained track records of implementing very strong policies and remain committed to maintaining such policies in the future.
  - Access under the FCL is provided under an FCL arrangement.
  - Access to the FCL is available only to those members that meet strict qualification criteria; drawings under it are not tied to ex post conditionality.
  - The FCL can be used for either contingent (precautionary) and actual balance of payments (BoP) needs.

- Key features
  - Flexible terms:
    - i) access is uncapped and funds are available upfront;
    - ii) grace period and repayment terms are relatively long (3¼–5 years);
    - iii) renewals are unrestricted;
    - iv) the FCL can be used for either contingent (precautionary) and actual BoP needs.
  - Approval: An FCL arrangement is approved following a confidential request from a member. Staff may assess qualification confidentially only if a country expresses interest. Management will consult the Executive Board at an informal meeting with a concise staff note; a formal Executive Board decision follows based on the member’s written request, a staff report assessing qualification and justifying access, and the Managing Director’s recommendation.
  - Length: The FCL may be a six-month arrangement or a one-year arrangement with a mid-term review (the choice is binary; no other periods are possible). For 12-month arrangements, no purchases can be made after six months until completion of an Executive Board mid-term review. Successive FCL arrangements may be approved provided qualification criteria continue to be met.
  - Access:
    - Access under the FCL is uncapped, and it can be augmented (subject to Board approval) during the arrangement subject to the member’s continued eligibility.
    - Cumulative access under the FCL would not normally be expected by staff to exceed 1000 percent of quota.
    - The exceptional access policy does not apply to the FCL (i.e., lending above the normal access limits of 200 percent annually and 600 percent cumulative does not trigger the exceptional access policy), although approval procedures are substantively similar to those under the exceptional access framework.
  - Conditionality:
    - There is no traditional ex post conditionality (no prior actions either); the track record of policy implementation provides assurance that corrective policies, if needed, would be implemented.
    - No conditionality—only qualification criteria—can be attached to the mid-term review or approval of successive arrangements.
    - Once an arrangement has expired, if there have been drawings under the arrangement then the Fund will conduct post program monitoring (PPM) while outstanding credit remains above 200 percent of quota.
  - Phasing and use:
    - The entire amount of requested access is available upon approval and remains available throughout the arrangement (subject to the mid-term review for one-year arrangements).
    - The arrangement can be requested on a precautionary basis or to address an actual BoP need.
    - The member may draw in one or multiple purchases at any time during the term of the arrangement.
    - The FCL expires upon the earlier of: (i) the expiration of its term; (ii) the drawing of the full amount of approved access; or (iii) the cancellation of the arrangement by the member.
  - Financial terms:
    - Purchases under the FCL are subject to the same financial terms (repayment period, surcharges, etc.) as SBAs.
    - Undrawn amounts are subject to the commitment fee.
  - Treatment in reserves:
    - Undrawn amounts available under the FCL arrangement are not counted in gross reserves.
    - Once drawn, FCL resources give rise to an increase in gross reserve assets, as well as external liabilities with maturities corresponding to the timing of repurchases.

- Commitment fee specifics (example and structure)
  - The marginal commitment fee is equal to 15 basis points for access up to 200 percent of quota, 30 basis points for access between 200 and 1000 percent of quota, and 60 basis points for access above 1000 percent of quota.
  - By way of example, the average commitment fee levied on a 500 (1000) percent of quota arrangement is 24 (27) basis points.
  - The commitment fee is levied upon approval of the arrangement and refunded on a pro rata basis if drawings are made under the arrangement or if the arrangement is cancelled without being drawn in full.

### Process for requesting and approving an FCL arrangement
- Initial steps and confidentiality
  - The member should approach staff or management confidentially and indicate its interest in obtaining financing under the FCL.
  - A mission is not required to discuss an FCL request or to assess qualification. However, if latest available Article IV report is more than a year old, or if circumstances warrant it, a fact-finding staff visit may be needed to assess FCL qualification.
  - Staff should strongly encourage confidentiality, as failure to qualify could have negative effects on market sentiment. Staff must treat the authorities’ request as confidential and cannot discuss qualification publicly.
  - Staff should wait for a formal expression of interest before initiating assessment of qualification and developing an agreed staff view.
  - In initial discussions, staff should enquire about the nature of BoP problems (actual or potential), desired level of access, length of arrangement, and whether the arrangement is precautionary.

- Assessment and preparatory steps
  - Area departments should consult closely with SPR on key elements and process for assessing qualification.
  - A confidential preliminary assessment of qualification should be prepared; staff may discuss criteria with the member but must emphasize that the Executive Board takes final decisions.
  - Area teams should consult early with SPR, FIN, LEG, and other functional departments as necessary to ensure thorough and evenhanded assessment.

- Support from other creditors
  - When support from other creditors is likely to be important, staff will consult with key creditors as appropriate.
  - In practice, consultation with other creditors is expected only when:
    - i) the FCL is requested on a nonprecautionary basis; and
    - ii) there are sizeable remaining financing gaps that need to be filled by other creditors (usually official bilateral creditors).
  - In such circumstances, staff should inform the Executive Board in a brief statement that the member requested access and that contacts with other creditors will be initiated; country authorities should be informed in advance.

- Board consultations, staff note, and publicity
  - Management will consult the Board in an informal (restricted) meeting if access may be appropriate; a concise staff note should set out the basis for recommending approval, including preliminary assessment of qualification and proposed access.
  - Following informal consultation, if market-sensitive leaks are a concern, 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.
  - The staff report (details in Annex II) will justify the level of access. A mission is not normally expected but may be necessary in some cases.

- Authorities’ written communication and safeguards
  - The authorities’ written communication requesting an FCL arrangement should describe macroeconomic conditions, broad policy goals and strategies for the term, and reasons for requesting Fund assistance; it should explain how they will remain committed to very strong economic policies and respond to shocks.
  - This written communication is not a Letter of Intent for monitoring policy commitments.
  - A member requesting an FCL arrangement is not subject to the Fund’s policy on safeguards assessments, but must authorize Fund staff access to the most recently completed annual independent audit of its central bank’s financial statements and permit external auditors to discuss findings with Fund staff, including written observations on internal control weaknesses.

- Circulation, Board approval, activation, and disclosure
  - Normal circulation periods apply; FCL-specific expedited procedures can be followed in urgent cases or where leaks could be market destabilizing.
  - The Board considers and approves an FCL arrangement based on the member’s written request and the staff report. Staff provide a Summing Up (internal) and a Chairman’s Statement for publication.
  - The credit line is open on approval of the arrangement. FIN needs authorization to debit the member’s SDR account for the commitment fee, due upon approval.
  - For drawings under the FCL, FIN requires official communication specifying the purchase amount and representing a BoP need; FIN will then determine operational details. Members are encouraged to disclose information about drawings, which the Fund routinely publishes.
  - The Managing Director will generally not recommend Board approval unless the member consents to publication of the associated staff report; the staff report and the authorities’ written communication are expected to be published shortly after Board approval.

- Mid-term (six-month) review for 12-month arrangements
  - Where a member has a 12-month FCL arrangement, a six-month review is required to assess continued adherence to qualification criteria.
  - The review should be completed by the Executive Board immediately prior to the lapse of the six-month period or the member could temporarily lose automatic access.
  - Unless the authorities want the arrangement to lapse at six months, staff should prepare a concise staff report updating developments, policy initiatives, and assessing qualification. Board approval of the review could be on a lapse of time basis.
  - A mission will not normally be necessary; assessment benefits from recent routine staff visits or Article IV consultations.
  - If there have been very substantial changes in policy strategies or goals, a new letter from the member should be attached and discussed.
  - The staff report would be subject to standard review process (but no Policy Consultation Meeting) and circulated according to normal procedures unless expedited procedures apply.

- Expiration and communications at conclusion
  - As an FCL arrangement nears expiration, staff or management could issue a factual press statement at the member’s request noting the successful conclusion and highlighting recent performance and the FCL’s supporting role.
  - Press statements should be coordinated with EXR and SPR; statements should not include any assessment of potential qualification for a successor FCL arrangement. Expressions of interest in successor arrangements are confidential and follow the same process as the initial request.

*Prepared by a team comprising Alison Stuart, Gustavo Adler, Manuela Goretti, Mercedes Vera Martin, and Manrique Saenz (all SPR), Ceda Ogada (LEG) and Marco Rossi (FIN), under the guidance of Lorenzo Giorgianni.*

### 4.      Determining qualification is not a tick box exercise against the criteria and indicators.

### 4.      Determining qualification is not a tick box exercise against the criteria and indicators.

### Core judgmental approach to qualification
- Qualification requires staff judgment based on all of the following (FCL decision, paragraph 2):
  - 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 balance of payments difficulties that it is encountering or could encounter. This is the core of the qualification process.
- Staff should indicate whether a very positive assessment of the member’s policies was given in the context of the most recent "2–3 years" Article IV consultations (FCL decision, paragraph 2).
- Qualification is not mechanical:
  - The qualification criteria and indicators in Annex I should be assessed in the initial short note to the Board and the staff report on the FCL arrangement request.
  - These criteria must take into account the variety of members’ circumstances and projection uncertainties.
  - Strong performance against all relevant criteria is not necessary to secure qualification; conversely, mechanically meeting most criteria does not secure qualification.
  - Significant shortcomings on one or more criteria—unless offset by compensating factors, including corrective policy measures underway—would generally signal non-qualification for the FCL.

### Confidentiality and Board notification
- If a member is assessed and judged not to qualify for the FCL, the request remains confidential.
- The Board is notified only when management decides that access under the FCL may be appropriate.

### Justification of access (general Fund policy basis)
- Access decisions should be based 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 capacity to repay the Fund, 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.
- "Determining Access on a Precautionary Basis (FCL and other Arrangements) (Attachment)" provides a framework for teams to assess appropriate access and includes examples from recent FCL requests and other precautionary arrangements.
- Further examples and details are available in Annex II of GRA Lending Toolkit and Conditionality—Reform Proposals; SPR reviewers and the Emerging Markets Division can provide guidance when needed.

### Annex I — Qualification criteria: overarching guidance
- The core of the qualification framework: members must have very strong economic fundamentals and institutional policy frameworks, a sustained track record of implementing very strong policies and adjusting to shocks, and remain committed to implementing very strong policies in the future (FCL decision, paragraph 2).
- Qualification does not preclude members planning or needing policy adjustments.
- Any assessment involves judgment and must consider the variety of member circumstances and uncertainties in economic projections.
- Significant shortcomings on one or more criteria—unless compensated—could signal the member is not among the strong performers for whom the FCL is intended.

### Qualification criteria and relevant indicators (as listed)
- Sustainable external position
  - Relevant indicators include: the debt-stabilizing noninterest current account balance; the level and composition of external debt; the level of net international reserves and the level and composition of private sector external assets; assessments of exchange rate misalignment.
  - Assess internal consistency between the currency regime and the fiscal-monetary policy mix.
- Capital account position dominated by private flows
  - Indicators: International Investment Position and composition of recent capital flows.
- Track record of steady sovereign access to capital markets at favorable terms
  - Indicators: comparison of spreads with comparator countries and relative performance of spreads during periods of global shocks.
- Reserve position for precautionary requests
  - When requested on a precautionary basis, the reserve position should remain relatively comfortable notwithstanding potential BoP pressures that justify Fund assistance.
  - Assessment of reserve levels would take into account a number of metrics (imports, short-term debt, monetary base) as relevant given the exchange rate regime.
- Sound public finances and sustainable public debt
  - Determined by a rigorous and systematic debt sustainability analysis covering evolution of nonfinancial public sector debt, rollover and financing requirements under alternative scenarios, assessment of contingent liabilities (where appropriate) and stress tests.
  - Relevant indicators: recent evolution of fiscal balances in relation to the economy’s cyclical position; quality of adjustment measures; assessment of medium-term plans anchoring fiscal policy outcomes; overall sound institutional budgetary framework as informed by recent fiscal ROSCs, where available.
- Low and stable inflation within a sound monetary and exchange rate policy framework
  - Indicators: recent evolution of core and headline inflation and inflation expectations; past and announced policy responses to inflationary shocks; adequacy of monetary policy instruments; accountability, transparency, and communication regarding objectives and responses.
- Absence of bank solvency problems posing an imminent threat of a systemic banking crisis
  - Indicators: evolution of deposits; measures of profitability; asset quality; capital adequacy; market, credit, and liquidity risk analyses (e.g., FSAPs).
- Effective financial sector supervision
  - Modalities: assessment of supervisory framework and legal and institutional framework, and operational capacity to respond promptly with bank interventions, resolution, and emergency liquidity assistance.
- Data transparency and integrity
  - Subscription to the Special Data Dissemination Standard (SDDS) or judgment that satisfactory progress is being made toward meeting its requirements; routine assessments (Article IVs) of data quality and integrity.

### Table 1 — Relevant indicators (selected items preserved)
- 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.
- 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; private foreign holdings of domestic debt/total domestic debt.
- 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).
- Reserve position (precautionary FCL requests)
  - Ratio of reserves to: short-term debt (remaining maturity basis); short-term debt (remaining maturity basis) plus current account deficit; imports; and broad money.
- Sound public finances
  - Public sector debt-to-GDP ratio, and debt sustainability assessment; primary and overall fiscal balance (average for the last 3/5 years); structural fiscal balances and debt-stabilizing primary balance.
- Low and stable inflation
  - Recent evolution of core and headline inflation and inflation expectations; past and announced policy responses to inflationary shocks; adequacy of monetary policy instruments; accountability, transparency, and communication.
- Absence of bank solvency problems
  - 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).
- Effective financial sector supervision
  - Assessment of supervisory standards and practices based on FSAP findings; assessment of legal and institutional framework and operational capacity for prompt corrective actions and emergency liquidity assistance.
- Data transparency and integrity
  - Subscription to the SDDS or a judgement that satisfactory progress is being made toward meeting its requirements. Routine assessments (Article IVs) of data quality and integrity.

### Annex II — Staff documents for the Executive Board on use of FCL resources
- A. Concise staff note for informal Board meeting should focus on qualification and access and include:
  - Qualification: assessment of the three core elements (very strong fundamentals, sustained track record, commitment to maintain policies), statement on whether the most recent "2–3 years" Article IV consultations included very positive assessments, and a preliminary assessment of Annex I criteria (with references to any aspects requiring more information).
  - Access: indication of appropriate access level based on a brief assessment of macroeconomic risks and potential or actual BoP needs considering risks to the current and capital accounts.
  - Tables: standard economic indicators and a balance of payments table (both with projections for the current year and following year), and a table on gross external financing requirements and sources under a baseline case and for an adverse scenario. A table comparing access metrics across various cases could be included.
- B. Staff Report for the formal request for an FCL arrangement should include:
  - Discussion of recent macroeconomic developments and policies, the economic outlook, and the authorities’ forward-looking policy plans.
  - Discussion of potential (or actual) sources of BoP pressures and other risks, including scenarios based on alternative assumptions (external debt rollover rates, magnitude of portfolio outflows, etc.).
  - Detailed assessment of the qualification criteria.
  - Debt sustainability analysis including evolution of debt, rollover and financing requirements under alternative scenarios, contingent liabilities assessment, and stress tests.
  - Discussion and justification of proposed access level.
  - Discussion of the member’s capacity to repay the Fund in the event of adverse contingencies that lead to FCL being drawn.
  - Tables: selected economic indicators with projections for the current year and following year, balance of payments table (ideally with projections for a five-year time span), tables on external financing requirements and sources and fiscal projections, debt sustainability tables (external and public), table on capacity to repay the Fund, and a table illustrating alternative metrics for access (compared with previous FCL and exceptional access cases).
  - A draft proposed decision and the text of the FCL arrangement prepared by LEG (Annex IV).
  - An assessment prepared by FIN on the impact of the proposed FCL arrangement on the Fund’s finances and liquidity position, as a supplement to the staff report.
  - Authorities’ written communication (see attachment).
- C. Staff report for the mid-term review should be concise and contain:
  - Recent economic developments (with a discussion about the role played by the FCL in dissipating tail risks) and policies.
  - Brief review of qualification criteria.
  - Staff appraisal.
  - A proposed decision to complete the review prepared by LEG.
  - If very substantial changes in policy strategies or goals have occurred, a new letter from the member setting out new strategies and goals should be attached and discussed.
  - Tables: standard economic indicators for the current year and the following year, balance of payments table (ideally with projections for a five-year time span), tables on external financing requirements and sources and fiscal projections for the current year and following year, debt sustainability tables (external and public), and a table on capacity to repay the Fund.

### Annex III — Expedited procedures for FCL requests
- EFM procedures do not apply to requests for FCL arrangements (FCL decision, paragraph 7); the FCL Decision sets out its own expedited procedures (paragraph 6(a)(v)).
- Expedited procedures may apply if a crisis is imminent or underway, or if fragile conditions and leak risks warrant rapid action.
- Possible expedited timetable:
  - Staff and management brief the Board on FCL qualification and proposed access level, on the basis of documentation provided to the Board at least "two hours" prior to the informal Board meeting.
  - Directors would be consulted during the informal Board meeting on possible issuance of a press release indicating the authorities’ interest and management’s intention to recommend Board approval of the FCL, taking 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 the circulation of the staff reports to the Board (paragraph 6(a)(v)).

*Source: _110209 - 4.      Determining qualification is not a tick box exercise against the criteria and indicators.*

### ANNEX IV. PROPOSED DECISION AND ARRANGEMENT TEMPLATES

### ANNEX IV. PROPOSED DECISION AND ARRANGEMENT TEMPLATES

### A. Proposed Decision—New Arrangement
- The following decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board:
  - 1. [] has requested a Flexible Credit Line arrangement in an amount equivalent to SDR [] for period of [six/twelve] months from [].
  - 2. The Fund approves the Flexible Credit Line arrangement for [] set forth in [].
  - 3. The Fund waives the limitation in Article V, Section 3(b)(iii).

### B. Arrangement text: [country name]—[Six/Twelve]-Month Flexible Credit Line Arrangement
- Communications and authority
  - Attached hereto is a written communication dated [...], from [the Minister of Finance and the Governor of the Central Bank of [...] requesting a Flexible Credit Line arrangement in accordance with paragraph 6(a)(iv)(I) of Decision No. 14283-(09/29), adopted March 24, 2009, on the Flexible Credit Line Arrangements.
  - In response to [] request, the International Monetary Fund (“the Fund”) grants this Flexible Credit Line arrangement in accordance with the following provisions:

- Rights to purchases and term
  - 1. For a period of [six/twelve] months from [], [] will have the right to make purchases from the Fund in an amount equivalent to SDR [], subject to paragraphs 2, 3, and 4 below, without further review by the Fund.

- Mid-term review limitation (for 12-month arrangements)
  - 2. [(a) [] will not make purchases under this arrangement after [] until an Executive Board review of []’s continued qualification for this Flexible Credit Line arrangement has been completed.] Note this is used only for the 12-month arrangement which entails a mid-term review.
  - (b) The limitation in paragraph 2(a) above shall not apply to purchases under this arrangement that would not increase the Fund’s holdings of []’s currency subject to repurchase beyond 25 percent of quota.

- Eligibility and suspension of purchases
  - 3. [] will not make purchases under this Flexible Credit Line arrangement during any period in which []: (i) has an overdue financial obligation to the Fund, or is failing to meet a repurchase expectation in respect of a noncomplying purchase pursuant to Decision No. 7842–(84/165) on the Guidelines on Corrective Action; or (ii) is failing to meet a repayment obligation to the PRGF-ESF Trust established by Decision No. 8759-(87/176) PRGF, or a repayment expectation to that Trust pursuant to the provisions of Appendix I to the PRGF-ESF Trust Instrument.
  - 4. Consistent with the Fund’s policies, []’s right to engage in the transactions covered by this Flexible Credit Line arrangement can be suspended only with respect to requests received by the Fund after (a) a formal declaration of ineligibility to use the Fund’s resources pursuant to Articles V, Section 5, VI, Section 1(a), and XXVI, Section 2(a) of the Fund’s Articles of Agreement, or (b) a decision of the Executive Board to suspend transactions, either generally pursuant to Article XXVII of the Fund’s Articles of Agreement, or in order to consider a proposal, made by an Executive Director or the Managing Director, formally to suppress or to limit []’s eligibility to use the Fund’s general resources. When notice of a decision of formal ineligibility or of a decision to consider a proposal is given pursuant to this paragraph 4, purchases under this arrangement will be resumed only after consultation has taken place between the Fund and [] and understandings have been reached regarding the circumstances in which such purchases can be resumed.

- Currencies, charges, and repurchases
  - 5. Purchases under this Flexible Credit Line arrangement shall be made in the currencies of other members selected in accordance with the policies and procedures of the Fund, unless, at the request of [], the Fund agrees to provide SDRs at the time of the purchase.
  - 6. [] shall pay a charge for this Flexible Credit Line arrangement in accordance with the decisions of the Fund.
  - 7. (a) [] shall repurchase the amount of its currency that results from a purchase under this Flexible Credit Line arrangement in accordance with the provisions of the Articles of Agreement and decisions of the Fund, including those relating to repurchases, as []’s balance of payments and reserve position improves.
  - (b) Any reductions in []’s currency held by the Fund shall reduce the amounts subject to repurchase under (a) above in accordance with the principles applied by the Fund for this purpose at the time of the reduction.

- Information, review, and consultation
  - 8. [] shall provide the Fund with information necessary to assess its qualification for this FCL arrangement in the context of the review called for in paragraph 5(a) of Decision No. 14283-(09/29), adopted March 24, 2009, on the Flexible Credit Line Arrangements. In addition, after the period of the arrangement and while [] has outstanding purchases in the upper credit tranches, the government will consult with the Fund from time to time, at the initiative of the government or at the request of the Managing Director, as appropriate.

### C. Proposed Decision—Six-Month Review
- The following decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board:
  - 1. The Fund has reviewed []’s continued qualification for a Flexible Credit Line Arrangement in accordance with paragraph 2(a) of the Flexible Credit Line Arrangement for [] (EBS/[]/[], Sup. [], []).

*Source: ANNEX IV. PROPOSED DECISION AND ARRANGEMENT TEMPLATES*

### 2. The Fund decides that the review specified in paragraph 2(a) of the Flexible Credit

### _110209 - 2. The Fund decides that the review specified in paragraph 2(a) of the Flexible Credit

### Aim
- Ensure Executive Board papers include a rigorous analysis of the determination of access levels based on a consistent framework while allowing country-specific flexibility.
- Require staff to clearly spell out underlying assumptions for access levels and show access is reasonable relative to a range of metrics and indicators.
- Reference: additional guidance provided in Annex II, GRA lending Toolkit and Conditionality—Reform Proposals, 3/13/09; approach draws on FCLs for Mexico, Poland, and Colombia.

### Key criteria for access
- 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: access cannot exceed this need).
- The member’s capacity to repay the Fund (including the strength of the member’s adjustment program).
- The member’s outstanding Fund credit and its track record of using Fund resources.
- Note: These criteria are broad and require substantial judgment, especially for precautionary access.

### Framework for determining access in a precautionary setting
- Construct a plausible adverse scenario to estimate a potential financing gap and appropriate level of access.
- Weight additional factors beyond the adverse-scenario financing gap only with careful justification.
- Adverse scenario construction should be informed by:
  - Downside global assumptions in line with the latest WEO downside scenario (describe shock and attach probability).
  - Evidence from past or current crises.
  - Country-specific factors and likelihood based on past experience.
- Consider whether an orderly exchange rate adjustment is warranted and assess reserve coverage across multiple metrics.
- Teams must ensure balance of payments tables demonstrate potential need.
- Table 1 (annex) provides a guide to shocks and examples; examples define minimum information required on assumptions and factors determining access scale.

### A. Global assumptions
- Draw global assumptions from downside risks identified by the latest WEO, GFSR, and the Vulnerability Exercise for Emerging Market Economies (VEE).
- Staff reports should indicate the scenario used and the probability attached.
- If WEO/GFSR are out of date, staff should justify alternative shocks.
- Illustrative point: "the October 2009 WEO issue projected, in an adverse scenario, world real GDP growth to be 2.2 percentage points lower in 2010 (this scenario corresponds to the lower end of the 90 percent confidence interval surrounding the forecast baseline)."
- GFSR: main source for global and regional assumptions on financing conditions, including market analysts’ expectations under baseline and adverse scenarios.

### B. Evidence from previous and current crisis cases
- Use past crisis episodes and economic literature to inform impacts on balance of payments components: FDI, rollover rates, resident and nonresident deposit outflows.
- Past episodes provide ranges for expected shocks to capital account components.

### C. Country-specific factors
- Critical to ensure adverse scenario plausibility.
- Focus on structure and volatility of capital flows and specific items (derivatives, intra-group lending, private foreign assets) that may exacerbate or mitigate BoP pressures.
- Staff must defend scale and probability of country-specific shocks based on past experience and current developments.

### D. Additional considerations and reserves adequacy
- Access determination may factor in further downside BoP risks beyond the adverse scenario, but with careful justification (e.g., further reduction in nonresident exposure; resident foreign currency and deposit outflows).
- Assess reserve adequacy and effects if the adverse scenario materializes:
  - Compare reserve levels across peers and metrics relevant to vulnerabilities and exchange rate regime (e.g., reserves-to-short term debt at remaining maturity plus current account deficit, reserves to imports coverage, reserves to M2 ratio).
  - Example: Mexico FCL case referred to reserve adequacy after shock; El Salvador used potential deposit outflows ahead of an election in financing needs assessment.
- Consider whether orderly exchange rate adjustment may be necessary under a permanent shock.
- If reserves are plentiful and well above adequate, staff may propose using international reserves to cover part of the financing gap, implying lower FCL access.
- If reserves need to rise over the FCL, staff may build in increased reserve levels in the baseline and maintain them in the adverse scenario.
- Access levels should be presented based on potential BoP need irrespective of specific use of Fund resources.
- Fund resources can finance potential budgetary needs if the public sector S-I deficit is mirrored by a BoP need (reference: Box 3 in Review of Recent Crisis Programs, 09/14/09).
- Operationally, proposed access levels should be commensurate with projected BoP need shown in staff reports.
- Verify access appropriateness against a wider range of metrics related to capacity to repay and quota; include comparison of high access cases indicators table in policy note and staff report.

### Table 1 (Illustrative BoP Shocks in Adverse Scenarios) — categories to consider
- A. Current Account: foreign demand, commodity prices, remittances; use WEO alternative scenario for global growth and commodity price decline; consider exports/imports composition and elasticities; current account norm and debt-stabilizing level.
- B. FDI: GFSR/VEE inputs; FDI decline in representative cases; historical volatility relative to other capital flows; foreign bank takeovers; investments in nontradable sector; greenfield investments; retained earnings.
- C. Equities and debt securities: VEE inputs; nonresident holdings and outflows from domestic equity and bonds; account for valuation effects.
- D. Debt Rollover: MLT/ST sovereign/bank/nonbank official/private; MCM survey or VEE for rollover rates; debt composition; trade credits; intra-group lending; private sector involvement.
- E. Other Investment: currency and deposits; secondary market; derivatives positions; GFSR/VEE inputs; stock/flows of nonresident deposits; resident deposit outflows; nonresident holdings of domestic debt; hedged derivatives; degree of dollarization.
- F. Gross International Reserves and Private Foreign Assets: Greenspan-Guidotti rule; Jeanne-Ranciere Reserve rule; evidence from programs; metrics selected by relevant vulnerabilities; weight of financial sector and government assets in reserves; availability of liquid private foreign assets.

### Examples of precautionary arrangements and access justification
- El Salvador (2009 precautionary SBA, 300 percent of quota):
  - Access based on three metrics for international reserves covering:
    - (i) potential withdrawal of 5 percent of total bank deposits combined with 50 percent rollover of short-term external credit;
    - (ii) 10 percent of total bank deposits (common central bank practice: international reserves cover about 10–15 percent of total deposits as liquidity buffer);
    - (iii) access of this scale (with approved IADB credit line) sufficient to cover total bank capital.
- Brazil (2003 augmentation and extension of SBA, treated as precautionary; 355 percent of quota):
  - Access set so reserves could stand a shock of a three-month decline in rollover rates on external debt to 25 percent.
- Mexico’s FCL (1000 percent of quota):
  - Designed to insulate against potential risks from global turbulence.
  - Analysis considered weaker capital account: sharp reduction in rollover rate on private sector debt (to levels similar to 1994–95 crisis), lower net FDI, some portfolio outflows, and a larger current account deficit generating an external financing shortfall of about $25−30 billion in a downside scenario.
  - Noted large nonresident direct exposure to Mexican assets as a risk.
  - Access of 1,000 percent of quota would bring Mexico’s key reserve coverage ratios closer to key emerging market peers.
- Poland’s FCL (1000 percent of quota):
  - Intended to maintain market access and safeguard against downside risks amid high volatility.
  - Baseline external financing requirement close to $106 billion for 2009, expected to be fully covered with small official reserve drawdown.
  - Adverse assumptions could produce a potential financing gap of about SDR12 billion (around $17.5 billion).
  - Access high relative to quota but in line with other high access cases on metrics such as GDP and reserves.
- Colombia’s FCL (SDR 7.0 billion, 900 percent of quota):
  - Tailored to mitigate BoP risks and support policy framework; reduce likelihood of BoP pressures from investor sentiment changes.
  - Baseline annual gross external financing needs for 2009 and 2010 estimated around $20 billion and fully financed.
  - Adverse external environment could create net financing needs of $6–8 billion during 2009–10.
  - Proposed access in line with other high-access cases by GDP, exports, and imports.

### Example boxes justifying access levels (selected key figures and assumptions)
- Poland — proposed access SDR13.69 billion:
  - Illustrative adverse scenario financing gap SDR11.6 billion (around $17.5 billion, 847 percent of quota).
  - Main assumptions:
    - A reduction in FDI of 15 percent versus 2009 baseline and about 45 percent versus 2008.
    - Equity portfolio outflows around 10 percent of total nonresident portfolio holdings (after valuation effects).
    - Implied rollover rates around 80 percent of short-term debt at remaining maturity.
    - Other investment outflows (mostly nonresident deposits) of $2.5 billion.
    - Drawdown of private foreign assets for 10 percent of total liquid assets; no drawdown of official reserves.
  - Proposed access SDR13.69 billion allows cushion of about SDR2 billion.
  - Poland: Proposed Access, 2009 — access in millions of SDRs: 13,690 (Poland proposed), 31,528 (Mexico proposed), 821,579 (Arrangement), 13,291 (20th Percentile), 8,339 (80th Percentile), 6,901 (Average Median Percentile). (Source: table in text.)
- Colombia — proposed access SDR6,966 million (900 percent of quota):
  - Staff alternative scenario: ex ante external financing gap of $5.8 billion (502 percent of quota) in 2009 and $8.2 billion (about 709 percent of quota) in 2010.
  - Key assumptions (vs baseline):
    - 20 percent decline in fuel prices and 10 percent decline in nonfuel commodity prices during 2009–10.
    - Further decline in FDI: 15 percent in 2009 and 10 percent in 2010.
    - Aggregate rollover rates of 85 percent in 2009 with lower rollover in 2010.
  - Adverse scenario does not include drawdown of nonresident holdings of domestic financial assets (about $4 billion) nor runs on bank deposits; proposed access builds in margin relative to weighted average of possible 2009–10 gaps.
  - Colombia: Proposed Access, 2009 — access in millions of SDRs: 6,966 (Colombia proposed), 13,690 (Poland proposed), 31,528 (Mexico proposed), 821,579 (Arrangement), 13,291 (20th Percentile), 8,339 (80th Percentile), 6,901 (Average Median Percentile). (Source: table in text.)

### Operational and analytic guidance
- Staff should present access based on potential BoP need and ensure BoP tables display projected need.
- Use a broad set of metrics to check appropriateness of access: capacity to repay, quota, GDP, reserves, exports, imports, total debt stock, short-term external debt, M2 ratios, and other indicators as in example tables.
- SPR reviewers and Emerging Markets Division can provide further guidance; see Annex II of GRA lending Toolkit and Conditionality—Reform Proposals for more detail.

*Source: _110209 - 2. The Fund decides that the review specified in paragraph 2(a) of the Flexible Credit*

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