## _011312 ## Source details **Canonical URL:** [_011312](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_011312.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_011312.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_011312.pdf.json) --- ### Executive Summary — Purpose and scope - Proposes to maintain the Poverty Reduction and Growth Trust (PRGT)-eligibility criteria established in early 2010 and considers, based on the application of such criteria, whether updates to the eligibility list are warranted at this time. - Executive Board expectation: the eligibility and graduation criteria and the list would be reviewed every two years. - Premise: access to the Fund’s scarce concessional resources should be preserved for members with low income and related vulnerabilities, while keeping PRGT eligibility closely aligned with International Development Association (IDA) practices. ### Executive Summary — Main conclusion on eligibility list - Based on application of the PRGT-eligibility framework, no countries are proposed for entry or graduation at this time. - Eight countries meet the income or the market access criterion for graduation from PRGT eligibility, but none is proposed for graduation at this time given their serious short-term vulnerabilities, exacerbated by current elevated risks in the global economy. ### Countries meeting graduation criteria but proposed to remain PRGT-eligible - Armenia and Georgia: - Meet the graduation income criterion. - Not proposed for graduation because they face serious short-term vulnerabilities, including large external imbalances in both and high debt in Armenia. - Dominica, Grenada, Maldives, and St. Vincent and the Grenadines: - Meet the graduation income criterion for small countries. - Staff proposes maintaining PRGT eligibility based on continued serious short-term vulnerabilities, including high risk of debt distress and regional financial sector risks. - Vietnam and Ghana: - Meet the market access criterion for the first time. - Staff proposes maintaining PRGT eligibility because of serious short-term vulnerabilities: Vietnam has not been able to establish and sustain macroeconomic stability; Ghana’s prospects depend critically on preserving the recent stability gains. ### Proposal on PRGT-eligibility framework - Proposes to maintain the PRGT-eligibility entry and graduation criteria established in 2010. - Rationale: the framework is transparent, remains closely aligned with IDA practices, and the differentiation between entry and more demanding graduation criteria minimizes the risk of untimely graduation. ### Proposal to redefine "small states" - Proposes to increase, with immediate effect, the population threshold used to define small states under the framework from 1 to 1.5 million, to align with the World Bank’s definition. - Purpose: to extend PRGT eligibility to vulnerable small countries that share key vulnerabilities (limited diversification, openness, insularity, and susceptibility to natural disasters). - Immediate effects: - This change would not result in any additional countries becoming PRGT-eligible now. - There are eight Fund members with populations that fall between 1 and 1.5 million, seven of which are not currently PRGT-eligible. - Of these seven, six have a per capita income that is on average about 12 times the IDA threshold; their per capita income ranges are cited (US$7,740 to US$25,420). - One member, Swaziland (per capita GNI US$2,600 in 2010—2.2 times the IDA threshold), is not currently PRGT-eligible but may qualify for entry in the near future depending on its income per capita; Swaziland also meets the criterion of lacking capacity to access international financial markets. - Timor-Leste, already PRGT-eligible, would be redefined as a small state and can therefore be expected to remain PRGT-eligible for a longer period because a higher graduation income per capita threshold (three times the IDA operational cutoff) would apply. - Note: The redefinition of the population threshold for small states will also be applicable to eligibility under the Post-Catastrophe Debt Relief (PCDR) Trust. ### Procedural and forward-looking items - For the next review in early 2014, staff intends to conduct a more comprehensive review of the PRGT-eligibility framework, including the entry and graduation criteria and the PRGT-eligibility list, in close and early consultation with Executive Directors. - Entry decisions can be adopted in the interim period between reviews; re-entry in the interim period would be possible for any country removed from the list in the context of overdue obligations to the PRGT, provided the country does not meet the graduation criteria at the time of re-entry. - South Sudan: expected to become a Fund member in the near future; given its GNI per capita (currently estimated at US$984, well below the current IDA threshold of US$1,175 per capita) and lack of capacity to access international financial markets on a durable and substantial basis, staff expects to propose South Sudan’s entry onto the PRGT-eligibility list following its membership in the Fund. ### Findings — Armenia and Georgia (income-criterion meeters) - Armenia - Per capita GNI: US$3,090 in 2010. - Income has been above the IDA threshold since 2004 and on an increasing trend over the past decade. - Crisis impact: a 14 percent decline in GDP in 2009. - Public debt rose from 16 percent of GDP in 2008 to 40 percent in 2010. - Growth: 2 percent in 2010; pace of recovery remains slow. - Current account deficit: 14 percent of GDP in 2010. - Foreign exchange reserves: 4.8 months of imports (could decline to two months under a combined negative shock to remittances and exports). - Financial sector: resilient due to high capitalization and liquidity; vulnerabilities from high dollarization and foreign currency lending. - External market issuance: no public or publicly guaranteed issuance in international markets over the past five years. - LIC-DSA: risk of debt distress assessed as low, but sizable vulnerabilities remain (current account, remittances dependence, weak export base, high public debt, high dollarization). - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Georgia - Per capita GNI: US$2,700 in 2010. - Income has been above the IDA threshold and on an increasing trend for the past five years. - Crisis impact: current account deficit ballooned to 23 percent of GDP in 2008 as exports collapsed; large decline in international reserves and a substantial balance of payments financing gap. - 2009 output contraction limited to 3.8 percent due to countercyclical fiscal policy, monetary and prudential easing, and exchange rate flexibility. - Recovery: real GDP growth exceeding 6 percent in 2010; projected at 5¾ percent in 2011. - Fiscal: deficit projected to fall from 6.6 percent of GDP in 2010 to less than 4 percent in 2011. - Inflation: declined to 1.9 percent in November 2011 from a peak of 14.3 percent in May. - Reserves: net international reserves regained pre-crisis level; import coverage projected to remain above four months in 2011. - Ongoing vulnerabilities: - Current account deficit remains relatively high at 10–12 percent of GDP since 2009. - FDI dropped from 17 percent of GDP in 2007 to projected 6 percent of GDP in 2011. - Financing depends on official and private sector borrowing, exposing Georgia to risks from sudden stops that could jeopardize investment-led growth and macroeconomic sustainability. - Policy response under discussion: successor SCF arrangement blended with an SBA to provide precautionary access and support post-crisis adjustment. - Banking sector: recently strengthened with lower NPLs due to write-offs and adequate provisioning. - Staff recommendation: maintain PRGT eligibility; reassess at next review. ### Findings — Small countries meeting income criterion (Dominica, Grenada, St. Vincent and the Grenadines, Maldives) - Common factors - All listed countries have per capita GNI currently three times IDA’s operational cutoff and incomes not on a declining trend (except where noted). - Maldives also meets the market access criterion based on cumulative market access over 2005–09 being higher than 100 percent of quota. - Staff proposes maintaining PRGT eligibility for these countries because of serious short-term vulnerabilities, particularly on debt and exposure to regional financial sector risks (ECCU members). - For ECCU members, resolution of regional financial sector issues (including in the insurance sector) could add pressures to high public debt burdens. - Dominica - Per capita GNI: US$4,960 in 2010. - Recovery: barely positive real GDP growth in 2010; real GDP growth expected to increase to 0.9 percent in 2011. - Public debt: 67 percent of GDP in 2010 (from 64 percent in 2009). - Financial sector vulnerability: exposed by collapse of CL Financial Group; potential contingent losses could add pressures to public debt. - DSA: risk of external debt distress remains moderate; debt outlook deteriorated after global crisis and remains precarious. - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Grenada - Per capita GNI: US$5,560 in 2010. - Growth: economy contracted for the second year in a row in 2010; modest real GDP growth of 1 percent expected in 2011. - Inflation: projected to remain elevated due to higher international food and fuel prices. - Financial sector vulnerability: exposed by collapse of CL Financial Group; potential contingent losses could pressure public debt. - Public and publicly guaranteed debt: 97 percent of GDP in 2010; projected to remain above 90 percent in the near term. - DSA: risk of external debt distress remains high. - Staff recommendation: maintain PRGT eligibility; reassess at next review. - St. Vincent and the Grenadines - Per capita GNI: US$4,850 in 2010. - Crisis/natural disasters: real GDP registered negative growth of 1.8 percent in 2010; projected to decline by 0.4 percent in 2011; hurricane Tomas (October 2010) and torrential rains in 2011 prompted two RCF requests. - Financial sector vulnerability: slower recovery may raise NPLs; exposure from CL Financial Group collapse creates contingent risk to public debt. - DSA: risk of external debt distress is moderate. - Short-term vulnerabilities: significant, with high gross public debt having reached 67 percent (as reported). - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Maldives — macro-fiscal and financial sector assessment - Per capita GNI: US$4,270 in 2010. - Market access: 744 percent of quota cumulatively over 2005–2009. - Real growth: 4.75 percent in 2010 (after contracting by 2¼ percent in 2009). - Inflation rate: 5 percent in 2010. - Fiscal deficit: 21 percent of GDP in 2010 (available data). - Fiscal deficits projected: 22 percent in 2011 and 19 percent in 2012. - Public debt: about 88 percent of GDP in 2010; expected to increase to 102 percent by 2012. - Government’s gross financing needs in 2011: estimated at 45½ percent of GDP. - Current account deficit: about 32 percent of GDP in 2010. - Financial sector: well capitalized and liquidity is high, but asset quality and profitability declined; fragile position of the Bank of Maldives is a key systemic vulnerability. - LIC-DSA: risk of debt distress increased from moderate to high due to unsustainable fiscal policies and financing risks. - Staff recommendation: maintain PRGT eligibility; reassess at next review. ### Findings — Vietnam and Ghana (market-access criterion meeters) - Market access and income - Both countries’ cumulative market access over 2005–09 exceeded the threshold of 100 percent of their current Fund quota. - Both have issued Eurobonds: Ghana in 2007; Vietnam in 2005, 2009, and 2010. - Both now meet the minimum income condition for graduation under the market access criterion (income above 80 percent of the IDA threshold): Ghana is above the threshold by 5.5 percent; Vietnam is at 94 percent of the threshold. - In contrast to two years earlier, both countries’ incomes have not been on a declining trend over the last five years. - Vietnam - Market access: 152 percent of quota cumulatively over 2005–2009. - Notable issuance: raised US$1 billion in a global bond issue in 2010. - Per capita GNI: US$1,100 in 2010. - Real GDP growth in 2010: 6¾ percent. - Inflation: 23 percent in August 2011. - Large unrecorded outflows equivalent to 13 percent of GDP contributed to pressures and a decline in international reserves to 1.4 months of imports. - Currency: devalued on four occasions between November 2009 and February 2011. - Financial sector risks: potential for substantial nonperforming loans under a weak regulatory and supervisory regime; rapid credit growth and connected lending increase risks. - LIC-DSA: risk of external debt distress is low; outlook for public sector debt is less favorable. - Policy implication: restoring macroeconomic stability and policy credibility depends critically on decisive implementation of stabilization measures. - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Ghana - Market access: 212 percent of quota cumulatively over 2005–2009. - Notable issuance: sovereign Eurobond of US$750 million in 2007. - Per capita GNI: US$1,240 in 2010. - Real growth: 6 percent in 2010. - Inflation: reduced from over 20 percent in 2009 to about 9 percent in 2010. - Public debt: 39 percent of GDP in 2010 (excluding expenditure arrears of about 2 percent of GDP and central government liabilities for unpaid SOE debts of about 9 percent of GDP). - Share of domestic debt held by nonresidents: 19 percent in 2010, compared to 8 percent in 2009. - External debt stock: risen substantially since MDRI debt relief in 2005. - Public sector debt projected to remain broadly unchanged in relation to GDP; a ratio of 40 percent noted as not providing strong buffers against shocks. - Adjustment supported by an ECF arrangement since July 2009; implementation uneven with slippages in 2010 and improved performance in 2011. - Main risks: overrun in the wage bill and pressures to increase spending ahead of the 2012 elections. - Financial sector vulnerabilities: 2011 FSAP found heightened financial stability risks given high NPLs, extensive state involvement, and weak risk management and accounting practices. - LIC-DSA: risk of external debt distress remains moderate. - Staff recommendation: maintain PRGT eligibility; reassess at next review. ### Key statistics extracted from table and text - Armenia: GNI per capita US$3,090; population 3.3 million. - Georgia: GNI per capita US$2,700; population 4.4 million. - Dominica: GNI per capita US$4,960; population 0.1 million. - Grenada: GNI per capita US$5,560; population 0.1 million. - St. Vincent and the Grenadines: GNI per capita US$4,850; population 0.1 million. - Vietnam: GNI per capita US$1,100 (data for 2010 not available; latest available data presented is for 2009); population 88.3 million. - Ghana: GNI per capita US$1,240; population 23.7 million. - Armenia: GDP decline of 14 percent in 2009; public debt rose from 16 percent of GDP in 2008 to 40 percent in 2010; growth 2 percent in 2010; current account deficit 14 percent of GDP in 2010; reserves 4.8 months of imports (could fall to two months under shocks). - Georgia: current account deficit 23 percent of GDP in 2008; output contraction 3.8 percent in 2009; real GDP growth exceeding 6 percent in 2010; projected growth 5¾ percent in 2011; fiscal deficit 6.6 percent of GDP in 2010 projected to fall to less than 4 percent in 2011; inflation 1.9 percent in November 2011 from 14.3 percent in May; current account deficit 10–12 percent of GDP since 2009; FDI fell from 17 percent of GDP in 2007 to projected 6 percent in 2011. - Dominica: public debt 67 percent of GDP in 2010 (from 64 percent in 2009); real GDP growth expected 0.9 percent in 2011. - Grenada: public and publicly guaranteed debt 97 percent of GDP in 2010; projected to remain above 90 percent in the near term; real GDP growth expected 1 percent in 2011. - St. Vincent and the Grenadines: real GDP -1.8 percent in 2010; projected -0.4 percent in 2011; gross public debt reached 67 percent (as reported). - Maldives: per capita GNI US$4,270 in 2010; market access 744 percent of quota cumulatively over 2005–2009; real growth 4.75 percent in 2010; inflation 5 percent in 2010; fiscal deficit 21 percent of GDP in 2010; public debt about 88 percent of GDP in 2010; government’s gross financing needs in 2011 estimated at 45½ percent of GDP; current account deficit about 32 percent of GDP in 2010; public debt expected to increase to 102 percent by 2012. - Vietnam: market access 152 percent of quota; issued US$1,000 million in 2010; per capita GNI US$1,100 in 2010; real GDP growth in 2010 6¾ percent; inflation 23 percent in August 2011; unrecorded outflows equivalent to 13 percent of GDP; reserves 1.4 months of imports. - Ghana: market access 212 percent of quota; issued US$750 million in 2007; per capita GNI US$1,240 in 2010; real growth 6 percent in 2010; inflation about 9 percent in 2010; public debt 39 percent of GDP in 2010; share of domestic debt held by nonresidents 19 percent in 2010. ### Policy recommendations and proposed decisions - Maintain PRGT eligibility for Armenia, Georgia, Dominica, Grenada, Maldives, St. Vincent and the Grenadines, Vietnam, and Ghana at this stage due to serious short-term vulnerabilities (notably on debt, current account deficits, dependence on remittances, weak export bases, high dollarization, and regional financial sector risks). - Reassess PRGT eligibility for each country at the time of the next PRGT-eligibility review. - For Georgia, consider a successor SCF arrangement blended with an SBA arrangement to provide precautionary access to Fund resources and support completion of the post-crisis adjustment process. - Authorities (where applicable) should focus on reducing banking sector risks, strengthening crisis preparedness, and restoring macroeconomic stability to support potential future graduation. ### Market access criterion and measurement (Annex II summary) - Market access measurement: - Based on public sector issuance or guaranteeing of external bonds or disbursements under public and publicly guaranteed external commercial loans in international markets. - Data sources: World Bank Global Development Finance (GDF) and Bloomberg and Dealogic for public sector issuance of external bonds. - Market access criterion: cumulative market access in percent of quota over a five-year period; criterion met if cumulative market access exceeds 100 percent of quota and there is evidence of market access during at least three of the last five years for which data are available. - Data notes: - GDF data provide a broader definition of market access than just Eurobonds, reporting loan-by-loan disbursements for public and publicly guaranteed debt. - The most recent available GDF data are for 2009; data for 2010 are incomplete. - Quotas used are the existing quotas in effect at the time of assessment; as of August 31, 2011 quotas reflected increased quotas for Chad, Maldives, and Vietnam as a result of the 2008 quota and voice reform (entered into force in March 2011). *Prepared by a staff team led by Bert van Selm comprising Nisreen Farhan, Kazuko Shirono, and Barbara Dabrowska from the Strategy, Policy, and Review Department (SPR), Patrick Njoroge from the Finance Department (FIN), and Gabriela Rosenberg from the Legal Department (LEG).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Purpose and scope - Proposes to maintain the Poverty Reduction and Growth Trust (PRGT)-eligibility criteria established in early 2010 and considers, based on the application of such criteria, whether updates to the eligibility list are warranted at this time. - Executive Board expectation: the eligibility and graduation criteria and the list would be reviewed every two years. - Premise: access to the Fund’s scarce concessional resources should be preserved for members with low income and related vulnerabilities, while keeping PRGT eligibility closely aligned with International Development Association (IDA) practices. ### Main conclusion on eligibility list - Based on application of the PRGT-eligibility framework, no countries are proposed for entry or graduation at this time. - Eight countries meet the income or the market access criterion for graduation from PRGT eligibility, but none is proposed for graduation at this time given their serious short-term vulnerabilities, exacerbated by current elevated risks in the global economy. ### Countries meeting graduation criteria but proposed to remain PRGT-eligible - Armenia and Georgia: - Meet the graduation income criterion. - Not proposed for graduation because they face serious short-term vulnerabilities, including large external imbalances in both and high debt in Armenia. - Dominica, Grenada, Maldives, and St. Vincent and the Grenadines: - Meet the graduation income criterion for small countries. - Staff proposes maintaining PRGT eligibility based on continued serious short-term vulnerabilities, including high risk of debt distress and regional financial sector risks. - Vietnam and Ghana: - Meet the market access criterion for the first time. - Staff proposes maintaining PRGT eligibility because of serious short-term vulnerabilities: Vietnam has not been able to establish and sustain macroeconomic stability; Ghana’s prospects depend critically on preserving the recent stability gains. ### Proposal on PRGT-eligibility framework (no change to main criteria) - Proposes to maintain the PRGT-eligibility entry and graduation criteria established in 2010. - Rationale: the framework is transparent, remains closely aligned with IDA practices, and the differentiation between entry and more demanding graduation criteria minimizes the risk of untimely graduation. ### Proposal to redefine "small states" - Proposes to increase, with immediate effect, the population threshold used to define small states under the framework from 1 to 1.5 million, to align with the World Bank’s definition. - Purpose: to extend PRGT eligibility to vulnerable small countries that share key vulnerabilities (limited diversification, openness, insularity, and susceptibility to natural disasters). - Immediate effects: - This change would not result in any additional countries becoming PRGT-eligible now. - There are eight Fund members with populations that fall between 1 and 1.5 million, seven of which are not currently PRGT-eligible. - Of these seven, six have a per capita income that is on average about 12 times the IDA threshold; their per capita income ranges are cited (US$7,740 to US$25,420) in the source. - One member, Swaziland (per capita GNI US$2,600 in 2010—2.2 times the IDA threshold), is not currently PRGT-eligible but may qualify for entry in the near future depending on its income per capita; Swaziland also meets the criterion of lacking capacity to access international financial markets. - Timor-Leste, already PRGT-eligible, would be redefined as a small state and can therefore be expected to remain PRGT-eligible for a longer period because a higher graduation income per capita threshold (three times the IDA operational cutoff) would apply. - Note: The redefinition of the population threshold for small states will also be applicable to eligibility under the Post-Catastrophe Debt Relief (PCDR) Trust. ### Procedural and forward-looking items - For the next review in early 2014, staff intends to conduct a more comprehensive review of the PRGT-eligibility framework, including the entry and graduation criteria and the PRGT-eligibility list, in close and early consultation with Executive Directors. - Entry decisions can be adopted in the interim period between reviews; re-entry in the interim period would be possible for any country removed from the list in the context of overdue obligations to the PRGT, provided the country does not meet the graduation criteria at the time of re-entry. - South Sudan: expected to become a Fund member in the near future; given its GNI per capita (currently estimated at US$984, well below the current IDA threshold of US$1,175 per capita) and lack of capacity to access international financial markets on a durable and substantial basis, staff expects to propose South Sudan’s entry onto the PRGT-eligibility list following its membership in the Fund. *Prepared by a staff team led by Bert van Selm comprising Nisreen Farhan, Kazuko Shirono, and Barbara Dabrowska from the Strategy, Policy, and Review Department (SPR), Patrick Njoroge from the Finance Department (FIN), and Gabriela Rosenberg from the Legal Department (LEG).* ### 12. Although Armenia and Georgia meet the graduation income criterion, these countries ### _011312 - 12. Although Armenia and Georgia meet the graduation income criterion, these countries ### Executive summary - Armenia and Georgia meet the graduation income criterion (per capita GNI above twice the IDA threshold) but are not proposed for graduation because both face serious short-term vulnerabilities. - Several small countries (Dominica, Grenada, Maldives, St. Vincent and the Grenadines) meet the graduation income criterion and in some cases the market access criterion, but staff proposes maintaining PRGT eligibility for these countries because of serious short-term vulnerabilities (especially on debt). - Vietnam and Ghana meet the market access criterion and now meet the minimum income condition under the market access criterion, but staff proposes maintaining PRGT eligibility due to serious short-term vulnerabilities that could jeopardize market access and debt sustainability. - Proposed treatment in all these cases: maintain PRGT eligibility now, with reassessment at the next PRGT-eligibility review. ### Findings: Armenia and Georgia (income-criterion meeters) - Armenia - Per capita GNI: US$3,090 in 2010. - Income has been above the IDA threshold since 2004 and on an increasing trend over the past decade. - Crisis impact: a 14 percent decline in GDP in 2009. - Public debt rose from 16 percent of GDP in 2008 to 40 percent in 2010. - Growth: 2 percent in 2010; pace of recovery remains slow. - Current account deficit: 14 percent of GDP in 2010. - Foreign exchange reserves: 4.8 months of imports (could decline to two months under a combined negative shock to remittances and exports). - Financial sector: resilient due to high capitalization and liquidity; vulnerabilities from high dollarization and foreign currency lending. - External market issuance: no public or publicly guaranteed issuance in international markets over the past five years. - LIC-DSA: risk of debt distress assessed as low, but sizable vulnerabilities remain (current account, remittances dependence, weak export base, high public debt, high dollarization). - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Georgia - Per capita GNI: US$2,700 in 2010. - Income has been above the IDA threshold and on an increasing trend for the past five years. - Crisis impact: current account deficit ballooned to 23 percent of GDP in 2008 as exports collapsed; large decline in international reserves and a substantial balance of payments financing gap. - 2009 output contraction limited to 3.8 percent due to countercyclical fiscal policy, monetary and prudential easing, and exchange rate flexibility. - Recovery: real GDP growth exceeding 6 percent in 2010; projected at 5¾ percent in 2011. - Fiscal: deficit projected to fall from 6.6 percent of GDP in 2010 to less than 4 percent in 2011. - Inflation: declined to 1.9 percent in November 2011 from a peak of 14.3 percent in May. - Reserves: net international reserves regained pre-crisis level; import coverage projected to remain above four months in 2011. - Ongoing vulnerabilities: - Current account deficit remains relatively high at 10–12 percent of GDP since 2009. - FDI dropped from 17 percent of GDP in 2007 to projected 6 percent of GDP in 2011. - Financing depends on official and private sector borrowing, exposing Georgia to risks from sudden stops that could jeopardize investment-led growth and macroeconomic sustainability. - Policy response under discussion: successor SCF arrangement blended with an SBA to provide precautionary access and support post-crisis adjustment. - Banking sector: recently strengthened with lower NPLs due to write-offs and adequate provisioning. - Staff recommendation: maintain PRGT eligibility; reassess at next review. ### Findings: Small countries meeting income criterion (Dominica, Grenada, St. Vincent and the Grenadines, Maldives) - Common factors - All listed countries have per capita GNI currently three times IDA’s operational cutoff and incomes not on a declining trend (except where noted). - Maldives also meets the market access criterion based on cumulative market access over 2005–09 being higher than 100 percent of quota. - Staff proposes maintaining PRGT eligibility for these countries because of serious short-term vulnerabilities, particularly on debt and exposure to regional financial sector risks (ECCU members). - For ECCU members, resolution of regional financial sector issues (including in the insurance sector) could add pressures to high public debt burdens. - Dominica - Per capita GNI: US$4,960 in 2010. - Recovery: barely positive real GDP growth in 2010; real GDP growth expected to increase to 0.9 percent in 2011. - Public debt: 67 percent of GDP in 2010 (from 64 percent in 2009). - Financial sector vulnerability: exposed by collapse of CL Financial Group; potential contingent losses could add pressures to public debt. - DSA: risk of external debt distress remains moderate; debt outlook deteriorated after global crisis and remains precarious. - Staff recommendation: maintain PRGT eligibility; reassess at next review. - Grenada - Per capita GNI: US$5,560 in 2010. - Growth: economy contracted for the second year in a row in 2010; modest real GDP growth of 1 percent expected in 2011. - Inflation: projected to remain elevated due to higher international food and fuel prices. - Financial sector vulnerability: exposed by collapse of CL Financial Group; potential contingent losses could pressure public debt. - Public and publicly guaranteed debt: 97 percent of GDP in 2010; projected to remain above 90 percent in the near term. - DSA: risk of external debt distress remains high. - Staff recommendation: maintain PRGT eligibility; reassess at next review. - St. Vincent and the Grenadines - Per capita GNI: US$4,850 in 2010. - Crisis/natural disasters: real GDP registered negative growth of 1.8 percent in 2010; projected to decline by 0.4 percent in 2011; hurricane Tomas (October 2010) and torrential rains in 2011 prompted two RCF requests. - Financial sector vulnerability: slower recovery may raise NPLs; exposure from CL Financial Group collapse creates contingent risk to public debt. - DSA: risk of external debt distress is moderate. - Short-term vulnerabilities: significant, with high gross public debt having reached 67 percent (as reported). - Staff recommendation: maintain PRGT eligibility; reassess at next review. ### Findings: Vietnam and Ghana (market-access criterion meeters) - Market access and income - Both countries’ cumulative market access over 2005–09 exceeded the threshold of 100 percent of their current Fund quota. - Both have issued Eurobonds: Ghana in 2007; Vietnam in 2005, 2009, and 2010. - Both now meet the minimum income condition for graduation under the market access criterion (income above 80 percent of the IDA threshold): Ghana is above the threshold by 5.5 percent; Vietnam is at 94 percent of the threshold. - In contrast to two years earlier, both countries’ incomes have not been on a declining trend over the last five years. - Vulnerabilities and risks - Vietnam - LIC-DSA: risk of debt distress is low. - Large swings in macroeconomic conditions in recent years; difficulty establishing and sustaining stability. - Ghana - LIC-DSA: risk of debt distress is moderate. - Depends critically on preserving recent stability gains. - Both were downgraded by rating agencies in 2010, citing heightened risks and inconsistent policy response. - Staff recommendation: maintain PRGT eligibility given serious short-term vulnerabilities that may jeopardize market access or add debt pressures. ### Key statistics extracted from Table 1 and text - Armenia: GNI per capita US$3,090; population 3.3 million. - Georgia: GNI per capita US$2,700; population 4.4 million. - Dominica: GNI per capita US$4,960; population 0.1 million. - Grenada: GNI per capita US$5,560; population 0.1 million. - St. Vincent and the Grenadines: GNI per capita US$4,850; population 0.1 million. - Vietnam: GNI per capita US$1,100 (data for 2010 not available; latest available data presented is for 2009); population 88.3 million. - Ghana: GNI per capita US$1,240; population 23.7 million. - Armenia: GDP decline of 14 percent in 2009; public debt rose from 16 percent of GDP in 2008 to 40 percent in 2010; growth 2 percent in 2010; current account deficit 14 percent of GDP in 2010; reserves 4.8 months of imports (could fall to two months under shocks). - Georgia: current account deficit 23 percent of GDP in 2008; output contraction 3.8 percent in 2009; real GDP growth exceeding 6 percent in 2010; projected growth 5¾ percent in 2011; fiscal deficit 6.6 percent of GDP in 2010 projected to fall to less than 4 percent in 2011; inflation 1.9 percent in November 2011 from 14.3 percent in May; current account deficit 10–12 percent of GDP since 2009; FDI fell from 17 percent of GDP in 2007 to projected 6 percent in 2011. - Dominica: public debt 67 percent of GDP in 2010 (from 64 percent in 2009); real GDP growth expected 0.9 percent in 2011. - Grenada: public and publicly guaranteed debt 97 percent of GDP in 2010; projected to remain above 90 percent in the near term; real GDP growth expected 1 percent in 2011. - St. Vincent and the Grenadines: real GDP -1.8 percent in 2010; projected -0.4 percent in 2011; gross public debt reached 67 percent (as reported). ### Policy recommendations and proposed decisions - Maintain PRGT eligibility for Armenia, Georgia, Dominica, Grenada, Maldives, St. Vincent and the Grenadines, Vietnam, and Ghana at this stage due to serious short-term vulnerabilities (notably on debt, current account deficits, dependence on remittances, weak export bases, high dollarization, and regional financial sector risks). - Reassess PRGT eligibility for each country at the time of the next PRGT-eligibility review. - For Georgia, consider a successor SCF arrangement blended with an SBA arrangement to provide precautionary access to Fund resources and support completion of the post-crisis adjustment process. - Authorities (where applicable) should focus on reducing banking sector risks, strengthening crisis preparedness, and restoring macroeconomic stability to support potential future graduation. *Source: IMF PRGT-eligibility review content provided in the supplied PDF chapter/section.* ### 2010. The outlook for debt sustainability critically depends on fiscal consolidation, a rebound ### 2010. The outlook for debt sustainability critically depends on fiscal consolidation, a rebound in economic growth, and a resolution of regional financial sector issues. ### St. Vincent and the Grenadines - Staff proposes maintaining St. Vincent and the Grenadines’ PRGT eligibility given the presence of serious short-term vulnerabilities, with the expectation that it will be reassessed at the time of the next PRGT-eligibility review. ### Maldives — macro-fiscal and financial sector assessment - Per capita GNI: US$4,270 in 2010. - Market access (public and publicly-guaranteed external bonds and commercial loans inflows): 744 percent of quota cumulatively over 2005–2009. - Growth and inflation: - Real growth: 4.75 percent in 2010 (after contracting by 2¼ percent in 2009). - Inflation rate: 5 percent in 2010. - Fiscal and debt positions: - Fiscal deficit: 21 percent of GDP in 2010 (available data). - Fiscal deficits projected: 22 percent in 2011 and 19 percent in 2012 (unsustainable fiscal measures expected to result in these deficits). - Public debt: about 88 percent of GDP in 2010; expected to increase to 102 percent by 2012. - Government’s gross financing needs in 2011: estimated at 45½ percent of GDP. - External sector: - Current account deficit: about 32 percent of GDP in 2010 (sustained by foreign capital inflows). - Financial sector vulnerabilities: - Banking system: well capitalized and liquidity is high, but asset quality and profitability declined due to exposure to large tourism-related borrowers. - Fragile financial position of the state-owned Bank of Maldives, the country’s largest bank, identified as a key systemic vulnerability. - Debt sustainability: - Risk of debt distress increased from moderate to high in the most recent DSA due to unsustainable fiscal policies and financing risks. - PRGT eligibility recommendation: - Staff proposes maintaining the Maldives’ PRGT eligibility given the presence of serious short-term vulnerabilities, with reassessment at the next PRGT-eligibility review. ### Vietnam — macro-financial and market access assessment - Market access (public and publicly-guaranteed external bonds and commercial loans inflows): 152 percent of quota cumulatively over 2005–2009. - Notable issuance: raised US$1 billion in a global bond issue in 2010. - Per capita GNI: US$1,100 in 2010. - Growth and macroeconomic developments: - Real GDP growth in 2010: 6¾ percent. - Inflation: 23 percent in August 2011. - External and reserve pressures: - Large unrecorded outflows equivalent to 13 percent of GDP contributed to pressures and a decline in international reserves to 1.4 months of imports. - Currency: devalued on four occasions between November 2009 and February 2011. - Financial sector risks: - System laden with potential for substantial nonperforming loans under a weak regulatory and supervisory regime. - Rapid credit growth and connected lending point to increasing risks. - Debt sustainability: - LIC-DSA indicated risk of external debt distress remains low; outlook for public sector debt is less favorable. - Potential contingent liabilities from the financial sector and state-owned enterprises pose further risks. - Policy implication: - Restoring macroeconomic stability and policy credibility depends critically on decisive implementation of stabilization measures. - PRGT eligibility recommendation: - Staff proposes maintaining Vietnam’s PRGT eligibility given the presence of serious short-term vulnerabilities, with reassessment at the next PRGT-eligibility review. ### Ghana — macro-fiscal and financial sector assessment - Market access (public and publicly-guaranteed external bonds and commercial loans inflows): 212 percent of quota cumulatively over 2005–2009. - Notable issuance: sovereign Eurobond of US$750 million in 2007. - Per capita GNI: US$1,240 in 2010. - Growth and inflation: - Real growth: 6 percent in 2010 (recovery from global crisis). - Inflation: reduced from over 20 percent in 2009 to about 9 percent in 2010. - Fiscal and debt positions: - Public debt: 39 percent of GDP in 2010 (excluding expenditure arrears of about 2 percent of GDP and central government liabilities for unpaid SOE debts of about 9 percent of GDP). - Share of domestic debt held by nonresidents: 19 percent in 2010, compared to 8 percent in 2009. - External debt stock: risen substantially since MDRI debt relief in 2005, reflecting borrowing and sovereign bond issuance. - Public sector debt projected to remain broadly unchanged in relation to GDP; a ratio of 40 percent noted as not providing strong buffers against shocks. - Fiscal management and risks: - Adjustment supported by an ECF arrangement since July 2009; implementation uneven with slippages in 2010 and improved performance in 2011. - Main risks: overrun in the wage bill and pressures to increase spending ahead of the 2012 elections. - Financial sector vulnerabilities: - 2011 FSAP found heightened financial stability risks given high NPLs, extensive state involvement, and weak risk management and accounting practices. - Debt sustainability: - Most recent LIC-DSA indicated risk of external debt distress remains moderate. - External debt burden indicators expected to remain below indicative thresholds provided programmed fiscal consolidation is achieved; main vulnerabilities include high debt service-to-revenue ratio and fiscal outlook risks. - PRGT eligibility recommendation: - Staff proposes maintaining Ghana’s PRGT eligibility given the presence of serious short-term vulnerabilities, with reassessment at the next PRGT-eligibility review. ### Eurobond issuance by LICs (selected examples, 2005–2011) - Country — Year — Size (in millions of U.S. dollars) - Vietnam 2005 750 - Ghana 2007 750 - Georgia 2008 500 - Senegal 2009 200 - Vietnam 2009 100 - Cote d'Ivoire 2010 2,332 - Vietnam 2010 1,000 - Georgia 2011 500 - Nigeria 2011 500 - Senegal 2011 500 ### Market access criterion and measurement (Annex II summary) - Market access measurement: - Based on public sector issuance or guaranteeing of external bonds or disbursements under public and publicly guaranteed external commercial loans in international markets. - Data sources: World Bank Global Development Finance (GDF) and Bloomberg and Dealogic for public sector issuance of external bonds. - Market access criterion: cumulative market access in percent of quota over a five-year period; criterion met if cumulative market access exceeds 100 percent of quota and there is evidence of market access during at least three of the last five years for which data are available. - Data notes: - GDF data provide a broader definition of market access than just Eurobonds, reporting loan-by-loan disbursements for public and publicly guaranteed debt. - The most recent available GDF data are for 2009; data for 2010 are incomplete. - Quotas used are the existing quotas in effect at the time of assessment; as of August 31, 2011 quotas reflected increased quotas for Chad, Maldives, and Vietnam as a result of the 2008 quota and voice reform (entered into force in March 2011). *Italic source: IMF PDF chapter “_011312 - 2010. The outlook for debt sustainability critically depends on fiscal consolidation, a rebound”* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_011312.pdf_