## _072612 — Executive Summary and Key Findings ## Source details **Canonical URL:** [_072612 — Executive Summary and Key Findings](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_072612.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_072612.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_072612.pdf.json) --- ### Major conclusions and overall assessment - The 2009 reforms broadly achieved their objective of closing gaps and creating a streamlined architecture of facilities better tailored to the diverse needs of LICs. - Supported by the financing package to boost the PRGT’s lending capacity for 2009–14 and the accompanying doubling of access, the Fund mounted an effective response to LICs’ needs during the global financial crisis. - Demand for Fund support through LIC facilities has been high and shifted to a more diverse range of tools, with greater use of short-term and emergency financing facilities, blending, and augmentations. - Use of facilities has been greatest among the poorer and HIPC-eligible LICs, and has increased strongly for small and fragile economies. - New empirical evidence suggests longer-term IMF program support has helped LICs support economic growth and build macroeconomic buffers, while short-term financing during the crisis helped preserve vital spending and facilitated a rapid recovery. - Central forward-looking challenge: preserve the Fund’s ability to provide effective policy and financial support in the face of a sharp prospective drop in the PRGT’s lending capacity after 2014. ### I. Recent reforms to LIC facilities (architecture and financing) - Key changes introduced in 2009: - Doubling of access. - Revision of access policies. - Strengthened blending rules. - Increased concessionality, including temporary interest relief. - Approval of a financing package to boost the Fund’s lending capacity during 2009–14. - New facility architecture: - ECF replaced the PRGF as the main tool for protracted balance of payments problems. - SCF created for short-term balance of payments needs, with precautionary use possible. - RCF created to provide rapid low-access financing with limited conditionality, streamlining ENDA, EPCA, and ESF-RAC. - PSI largely unchanged. - Financing package highlights: - Board endorsed a LIC financing package to more than double concessional lending capacity to SDR 11.3 billion (US$17 billion) for 2009–14. - General and special SDR allocations provided more than SDR 8 billion to bolster LICs’ foreign exchange reserves during the crisis. ### II. Experience with the new LIC facilities — demand, instrument mix, and usage - Demand and commitments: - Almost 50 PRGT-eligible countries in program or near-program mode during the period reviewed. - New concessional financing commitments peaked at nearly SDR 2.5 billion (US$3.8 billion) in 2009. - In 2010 and 2011, annual commitments averaged SDR1.2 billion. - Diversification of instruments: - Around three-quarters of PRGT-eligible countries used a Fund-supported program or instrument since the reform. - Greater focus on episodic short-term and emergency financing; several countries sought precautionary financing. - Facility-specific usage: - ECF: around 30 ECF arrangements in place in any given year; no low-access ECF arrangements requested since the crisis onset. - SCF: since 2010, four SCF-supported programs requested (Solomon Islands in 2010 and 2011, Honduras, and Georgia), three on a precautionary basis. - RCF and predecessors: since 2008, 14 countries requested support under RCF and previous emergency facilities; strongest increase in demand from small economies hit by natural disasters. - PSI: Six LICs used PSI since 2008; facilitated rapid short-term financing during the crisis (e.g., Senegal 2008; Mozambique and Tanzania 2009). ### Use patterns across groups and regions (high-level statistics preserved) - Total annual access as a share of total quota of all LICs rose from an average of about 6 percent during 2000–08 to 13 percent in 2009–12. - Average concessional credit outstanding of PRGT users increased from 47 to 76 percent of quota between end-2008 and June 2012. - Over two-thirds of countries with per capita income below the IDA operational cutoff used a LIC facility or instrument in a given year since 2009. - Prior to 2009, about one-quarter of small PRGT-eligible countries used Fund facilities in a given year; since 2009, more than half have sought support. - Use of LIC facilities in fragile LICs: prior to 2009 about one-third used facilities in a given year; since 2009 almost two-thirds have engaged with the Fund. ### Access, blending, and financing terms - Access and augmentations: - Average size of augmentations increased to 32 percent of quota since the reform, compared to 15 percent of quota in 2000–08. - Augmentations were used extensively in 2009; nine countries requested augmentations in 2009 alone. - Blending: - Blending of concessional with GRA resources increased after 2009; concessional component of blended assistance normally half of total access, subject to a floor of 25 percent of quota and a ceiling of 50 percent of quota. - Blending allowed higher overall access compared to PRGT-only financing but on somewhat less concessional terms. - PRGT interest rate mechanism and temporary relief: - New mechanism links interest rates on PRGT credit to the SDR interest rate, with biennial reviews. - Exceptional interest relief (zero percent interest on all concessional credit) was adopted for the crisis and extended through end-2012. - Interest Rate Mechanism table (interest rate for concessional facility, in percent, based on average SDR rate): - If SDR rate < 20.000: ECF 0.25; RCF 0.25; SCF 0.25 - If SDR rate ≥ 20.000 and ≤ 50.250: ECF 0.25; RCF 0.25; SCF 0.50 - If SDR rate > 50.500: ECF 0.50; RCF 0.50; SCF 0.75 ### Design of PRGT arrangements and operational flexibility - Conditionality and reviews: - March 2009 reform discontinued structural performance criteria and relied on a review-based approach to monitor structural reforms. - More than 90 percent of country authorities and mission chiefs agreed program design and implementation has been sufficiently flexible. - Debt limits policy: - Reformed in 2009 to link limits on nonconcessional external borrowing to individual debt vulnerabilities and capacity. - As of end-June 2012, 24 out of 33 LICs with a Fund-supported program eligible for more flexible options under the new policy. - PRS documentation and timing: - ECF and PSI users were allowed more time to prepare a PRS document (by the second review rather than prior to program start); about two-thirds of ECF users and one-third of PSI users used this flexibility. - Procedural issues: PRS update requirements have in some cases delayed reviews and created administrative burdens. - Suggested operational refinements: - Allow review completion to be met by detailed description in the LOI/MEFP when a full PRSP is already in place. - Allow JSANs to be submitted for information or as a stand-alone paper in specified circumstances. - Introduce a framework to lapse defunct arrangements after notification (e.g., notify when no review completed over past "12 months" and expire in "six months" unless on track). - Provide options for longer initial durations of ECF arrangements and more flexible phasing of disbursements (minimum semi-annual). ### Economic outcomes associated with Fund engagement (evidence) - Long-term engagement benefits (study covering 1986–2010): - LICs with long-term Fund engagement (at least five years per decade) experienced significantly higher real per capita GDP growth, tax revenue, FDI, institutional quality, and social spending, and significant reductions in poverty, inflation, external debt, and growth volatility. - Results do not appear to depend on the amount of Fund financing provided over the longer term. - Crisis-period fiscal and spending outcomes: - Stepped-up financing during the crisis relaxed liquidity constraints, allowed preservation of vital spending, and facilitated a rapid recovery. - Countries with IMF programs increased real spending more than non-program countries in 2009; countercyclical fiscal responses helped cushion adverse growth impacts. - Many programs adopted social and other priority spending targets; social spending continued to increase in real terms in most LICs with Fund-supported programs in 2010–11. ### III. Looking ahead — central challenge, resource projections, and options - Central challenge: Preserve ability to provide effective support given sharp prospective drop in PRGT lending capacity after 2014. - PRGT funding and demand projections: - PRGT annual concessional lending capacity during 2012–14: about SDR 2.2 billion. - If demand is about SDR 1.6 billion annually (average 2009–11), lending at this level could be supported for another year or enable a modest increase in longer-term lending capacity at end-2014. - Projected demand for 2015–34: SDR 1.2–1.9 billion a year. - Projected PRGT lending capacity after 2014: - Annual average of only SDR 0.7 billion in nominal terms. - SDR 0.8 billion if demand through 2014 turns out at the lower end of projections. - Scenario variations (mid-point projection SDR 1.5 billion): - Fall to SDR 1.2 billion if the three largest PRGT-eligible countries (by quota) did not draw again. - Fall to SDR 1.3 billion if per capita GDP growth in LICs was 2 percentage points higher than in the baseline. - Increase to SDR 1.7 billion if countries graduated three years later than baseline. - Increase to SDR 1.9 billion assuming access to the PRGT is 50 percent above baseline in blend cases. - Consequences if new concessional resources are not secured: - Access to the PRGT would need to be sharply curtailed after 2014. - To fit within a self-sustaining envelope of SDR 0.7 billion per year, average access would have to fall to 0.04 percent of eligible LICs’ GDP, implying: - Decline of more than 60 percent relative to access over 2003–08. - Decline of 75 percent relative to expected access over 2009–14. - Alternatively, a cut of some 40 percent in nominal SDR access may be needed for 2015–20. ### Options to fill the resource gap (preserve concessional capacity) - Option 1 — Use of gold sale windfall profits: - Remaining windfall profits from gold sales: SDR 1.75 billion. - Using these to replenish subsidy resources would raise annual self-sustaining lending capacity from about SDR 0.7 billion to SDR 1.1 billion. - Additional measures to conserve/supplement subsidy resources: - Temporary suspension of reimbursement to the GRA for PRGT administration costs: would yield some SDR 65 million annually and raise PRGT capacity by an additional SDR 0.3 billion per year. - Ad hoc bilateral fundraising in severe crises (as in 2009). - Option 2 — Establish regular fundraising mechanism: - Additional financing needs in a range of SDR 0.1 billion (low case) to SDR 0.3 billion (high case) per year. - Required scale would far exceed recent ad hoc efforts and face donor budgetary pressures. - Top-up fundraising and/or temporary suspension of GRA reimbursement could be mobilized when demand exceeds the low case. - If new resources cannot be secured: consider sharp curtailment of access, stricter graduation, or nominal SDR access cuts of about 40 percent for 2015–20. ### Access policies, financing terms, and tailoring (findings and proposals) - General observations: - Current access levels in SDR terms remain on average broadly adequate for now; future adjustments depend on available resources. - Recommendation on the 14th General Review of Quotas: concurrent lowering of access limits and norms in percent of quota when the 14th review becomes effective; strong case for reducing access norms and limits in percent of quota by up to 50 percent when quotas double in SDR terms. - If resource-constrained, a cut of some 40 percent in nominal SDR access may be needed for 2015–20. - Targeting access: - New access norms exert a strong gravitational pull; access has been at the relevant norm for more than half of all ECF arrangements approved after reform. - Issues identified: - For blended PRGT-GRA financing, concessional component often at or close to its limit (50 percent of quota), sometimes exceeding norms for PRGT-only arrangements. - Cumulative PRGT access limits (300 percent of quota) may be overly restrictive in some cases. - Sub-limits on cumulative RCF access may unduly constrain responses for small island economies prone to frequent natural disasters and fragile situations. - Possible merit in raising cumulative RCF limit from 75 to 100 percent of quota, and from 100 to 125 percent for exogenous shocks, while leaving annual sub-limits unchanged. - Financing terms and differentiation: - Financing terms of PRGT loans appear on average to strike a reasonable balance between concessionality and lending capacity. - The 2009 reform implies an average grant element of PRGT lending of around 35 percent under ―normal‖ world interest rates. - Record low global interest rates have reduced grant element to well below 35 percent despite zero interest policy. - Lengthening maturities beyond ten years would tie up scarce resources and limit ability to meet new needs. - Options for better tailoring: - Contingent tranches: set base access and a pre-specified relatively low-access contingent tranche that can be activated for urgent unforeseen needs without a review if the program is on track; could be broadly cost neutral. - Greater differentiation through blending or interest rates: - Proposal to set interest rate for poorest and most vulnerable LICs to zero; trade-off that applying zero rate to all PRGT lending could lower self-sustaining capacity by about 10 percent (order of magnitude). - Offsets could include reducing or eliminating subsidization of access above a certain level for less vulnerable LICs. - Two approaches: interest rate surcharges for less vulnerable LICs on access exceeding thresholds; broaden presumption of blending so access above certain levels provided through blended financing. - Drawbacks: blending ties effective terms to SDR interest rate fluctuations; surcharges require differentiating rates across sub-groups and would face operational complexity. - Debt relief considerations: - Flexible repayment terms (e.g., loans with floating grace periods) pose operational and legal difficulties for the Fund. - The Fund can join multilateral debt relief under the PCDR for catastrophic natural disasters; expanding PCDR coverage raises definitional and resource challenges. - Feasible refinement: clarify circumstances under which the Fund would consider across-the-board interest relief, as done during 2009–12. ### Precautionary and policy support for LICs — gaps and possible refinements - Rationale: - LICs’ vulnerability to global volatility increased due to deeper integration, commodity price volatility, and severe downside global risks. - Gaps identified: - No clear PRGT instrument analogous to FCL/PLL for the most advanced LICs to provide high upfront contingent access and a strong signal to investors/donors. - PSI provides signal but stringent conditionality and no automatic financing. - Constraints on SCF precautionary use: - 2.5-out-of-5-year limit on SCF use can constrain support during protracted global risks. - 50 percent of quota annualized concessional access limit is low compared with RCF support of up to 50 percent of quota for exogenous shocks with lower conditionality. - Availability fee (with exceptional interest relief) can make preserving SCF precautionary status more expensive than drawing. - Trade-offs and design options: - Creating a new precautionary instrument would likely need to limit qualification to advanced, globally integrated LICs and may require blending with GRA resources or minimal subsidization above thresholds. - More feasible near-term approach: increase flexibility of current facilities (see below) to expand precautionary and contingent support without major new subsidy needs. - Efficiency note: - Contingent financing can reduce reliance on costly self-insurance (reserve accumulation) and, if well designed, may not have substantially larger subsidy costs over time compared with ex post support. ### IV. Increasing flexibility of LIC facilities — proposals and operational options - Relax SCF access and timing restrictions: - Do not count arrangements without drawings against the "2.5-out-of-5-year" limit. - Allow precautionary support during protracted uncertainty while maintaining episodic nature of SCF disbursements. - Combine with a higher annualized access limit (e.g., "75 percent of quota") and explicit frontloading recognition. - Refine ECF to enhance precautionary and policy support: - (i) Introduce pre-specified contingent tranches, or allow augmentations between reviews (e.g., up to the RCF access limit). - (ii) Allow ECF users the option of eschewing disbursements when the balance of payments position improves to build a buffer of access. - Enhance PSI usability: - Adjust review schedules, reduce PRS documentation requirements, and/or abolish Assessment Criteria (ACs); broaden PSI qualification focus to sustainability of macroeconomic policies. - Streamline PRS linkages and procedural hurdles: - Allow reviews to be met by LOI/MEFP description when full PRSP exists. - Allow JSANs to be submitted for information or as stand-alone papers in specified timelines (e.g., when no Board documents expected within "four months"). - Lapse defunct arrangements: - Notify members when no review completed over past "12 months" and expire arrangement in "six months" unless brought back on track. - ECF duration and phasing: - Current ECF initial approval is "three years", extensible up to two additional years; since 2010 there have been "23 requests" for extensions with about "one year, on average" per extension. - Proposals: allow longer initial durations to align with five-year PRSP cycles and blended financing; make phasing of disbursements fully flexible with minimum semi-annual disbursements. ### Box: Summary of possible refinements (main objectives and refinements) - Create sustainable concessional financing beyond 2014: - Two main options: (i) use additional gold windfall profits, or (ii) regular large-scale fundraising. - Supplement with contingent mechanisms when demand exceeds supply (e.g., temporary suspension of GRA reimbursement). - Maintain SDR access broadly unchanged for now; halve access in quota terms when the 14th review becomes effective; periodically increase SDR access as resources permit. - Make most efficient use of PRGT resources: - Supplement base ECF/SCF access with contingent tranches. - More concessional terms for the poorest and most vulnerable LICs; greater blending for higher-access requests of other countries. - Modest relaxation of cumulative RCF sub-limits. - Enhance LICs’ access to contingent financing and policy support while limiting additional subsidy use: - (i) Relax SCF limits. - (ii) Make PSI more flexible. - (iii) Refine ECF options. - Streamline PRGT operation: - Tie reviews to MEFP discussion of PRS-program linkages when PRSP exists; allow LOT consideration of JSANs; framework for terminating defunct arrangements; options for longer initial ECF duration; more flexible disbursement phasing. ### Key numerical and technical points preserved exactly - PRGT annual concessional lending capacity during 2012–14: about SDR 2.2 billion. - Projected PRGT lending capacity after 2014: annual average of only SDR 0.7 billion in nominal terms (SDR 0.8 billion under lower-demand realization). - Projected demand for 2015–34: in the range of SDR 1.2–1.9 billion a year. - Remaining windfall profits from gold sales: SDR 1.75 billion. - Using gold windfall profits to replenish subsidy resources would raise annual self-sustaining lending capacity from about SDR 0.7 billion to SDR 1.1 billion. - Temporary suspension of reimbursement to the GRA could yield some SDR 65 million annually and raise PRGT capacity by an additional SDR 0.3 billion per year. - Applying a zero rate to all PRGT lending could lower the self-sustaining lending capacity of the PRGT by about 10 percent (order of magnitude). - The 2009 reform implies an average grant element of PRGT lending of around 35 percent under ―normal‖ world interest rates. - The temporary interest rate waiver on PRGT loans extends through end-December 2012; the applicable interest for 2013 would be: zero percent for all ECF and RCF loans; 0.25 percent for SCF loans; existing ESF loans and subsidized ENDA/EPCA credits. - SCF constraints cited: "2.5-out-of-5-year" limit on use and "50 percent of quota" annualized access limit (SCF); RCF support up to "50 percent of quota" for exogenous shocks with much lower conditionality. - Average size of augmentations increased to 32 percent of quota since the reform, compared to 15 percent of quota in 2000–08. - Total annual access as a share of total quota of all LICs increased from an average of about 6 percent during 2000–08 to 13 percent in 2009–12. - Average concessional credit outstanding of PRGT users increased from 47 to 76 percent of quota between end-2008 and June 2012. - Financing package target: boost lending capacity to SDR 11.3 billion for 2009–14; target mobilization of new loan resources SDR 10.8 billion. - Estimated subsidy needs: SDR 2.5 billion (end-2008 NPV terms); available resources: 1.0 SDR; remaining needs: 1.5 SDR. - Sources envisaged included transfer from PRGT Reserve Account SDR 0.6, new bilateral contributions 0.2–0.4 SDR, delaying PRGT reimbursement 0.15–0.2 SDR, and gold sales resources 0.5–0.6 SDR. *Italic: Source: IMF document _072612 — Executive Summary and selected chapter excerpts (as supplied).* ### Executive Summary ...................................................................................................... ### EXECUTIVE SUMMARY ### Key Findings and Conclusions - The 2009 reforms have broadly achieved their objective of closing gaps and creating a streamlined architecture of facilities that is better tailored to the diverse needs of LICs. - Supported by the financing package to boost the PRGT’s lending capacity for 2009–14 and the accompanying doubling of access, the Fund was able to mount an effective response to LICs’ needs during the global financial crisis. - Demand for Fund support through its LIC facilities has been high, and shifted to a more diverse range of tools, with greater use of short-term and emergency financing facilities, blending, and augmentations. - Use of facilities has been greatest among the poorer and HIPC-eligible LICs, and has increased strongly for small and fragile economies. - New empirical evidence suggests that longer-term IMF program support has helped LICs support economic growth and build macroeconomic buffers, while short-term financing during the recent crisis helped preserve vital spending and facilitated a rapid recovery. - Looking ahead, LICs will remain exposed to global risks and volatility. The central challenge is to preserve the Fund’s ability to provide effective policy and financial support in the face of a sharp prospective drop in the PRGT’s lending capacity after 2014. - Creating a sustainable concessional financing framework will require securing additional resources—either through use of gold windfall profits or regular fundraising—while making the most efficient use of the PRGT’s limited resources by better targeting LICs’ diverse needs and capacities, including greater use of blending with GRA resources. - Current access levels in SDR terms remain on average broadly adequate for now, but there is scope for better targeting country-specific balance of payments needs. Future adjustments in access will depend in large part on available resources. - Access levels in terms of quotas will need to be reduced when the 14th quota review becomes effective. - Existing PRGT financing terms appear on average to strike the right balance between concessionality and lending capacity, although there may be merit in more differentiated terms, e.g., through greater use of blending. - Given persistently high global risks, improving the Fund’s ability to meet LICs’ increased demand for contingent financing and policy support would help reduce their reliance on costly self-insurance. However, any modifications should be designed to limit the need for additional resources. - Many members utilized the increased operational flexibility under the 2009 reforms, but recent experience has highlighted a few areas where streamlining and greater flexibility could enhance the Fund’s ability to respond effectively to members’ needs. ### I. Recent Reforms to LIC Facilities - The 2009 reform closed gaps and created a streamlined architecture of facilities tailored to the diverse needs of LICs. - Key changes included: - Doubling of access. - Revision of access policies. - Strengthened blending rules. - Increased concessionality, including through temporary interest relief. - Approval of a financing package to boost the Fund’s lending capacity during 2009–14. - Historical context and motivations: - For two decades following ESAF in 1987, support was delivered almost entirely through medium-term financial arrangements; ESAF replaced by PRGF in 1999. - Improved policies, HIPC, and MDRI reduced continuous dependence on IMF balance of payments support, prompting the introduction of the PSI in 2005 and the ESF in 2006 (enhanced in 2008 with ESF-RAC and ESF-HAC). - Pre-2009 piecemeal changes left three notable gaps: (i) flexible short-term financing; (ii) a precautionary instrument; and (iii) flexible emergency financing. - New facility architecture established in 2009: - ECF replaced the PRGF as the main tool for protracted balance of payments problems. - SCF created to provide support for short-term balance of payments needs, with possibility of precautionary use. - RCF created to provide rapid low-access financing with limited conditionality for urgent balance of payments needs, streamlining ENDA, EPCA, and ESF-RAC. - PSI largely unchanged. - Modalities and concessionality: - Access limits and norms designed to ensure consistency across ECF, SCF, and RCF. - Blending rules strengthened to preserve concessional resources while allowing higher access when needed (see Appendix II). - New interest rate mechanism introduced to increase concessionality and limit fluctuations of the grant element (see Appendix III). - Temporary interest relief on all concessional credit approved and recently extended through end-2012. - Some operational modalities relaxed, including more time to meet PRS documentation requirements and greater tailoring of debt limits policy and structural conditionality. - Financing package: - In July 2009, the Board endorsed a LIC financing package to more than double the Fund’s concessional lending capacity to SDR 11.3 billion (US$17 billion) for the period 2009–14. - Most additional subsidy resources mobilized from the Fund’s internal resources, including those linked to gold sales, and include new bilateral contributions (see Appendix IV). - General and special SDR allocations provided more than SDR 8 billion to bolster LICs’ foreign exchange reserves during the global financial crisis. ### II. Experience With The New LIC Facilities - Preliminary assessment (first stage of the review) shows the Fund has largely been able to provide flexible and tailored support to LICs, helping them navigate the global financial crisis. - The assessment draws on observed facility usage, program design features, country characteristics, and economic outcomes, and was informed by staff consultations with member country authorities, civil society organizations, and Fund mission chiefs (Appendix V). - Note on process: - This paper is an early review; a second paper with specific proposals will follow based on Executive Directors’ feedback. - A separate Board paper on the review of PRGT eligibility is planned for early 2013. ### II.A Tailoring to Country Needs - Overall patterns of demand and use: - Demand for Fund policy and financial support has remained very high, with currently almost 50 PRGT-eligible countries in program or near-program mode. - New concessional financing commitments peaked at nearly SDR 2.5 billion (US$3.8 billion) at the height of the crisis in 2009, almost four times the historical average. - In 2010 and 2011, annual commitments averaged SDR1.2 billion, well above both the historical average and the Fund’s longer-term concessional lending capacity. - Official development assistance from other sources remained relatively stable over the period. - Diversification of instruments: - Since the reform, around three-quarters of PRGT-eligible countries have had a Fund-supported program or instrument in place, a somewhat higher share than prior to the onset of the crisis. - The nature of support shifted from near-exclusive reliance on the ECF and predecessors to a more diverse range of tools, with greater focus on policy support and episodic short-term and emergency financing; several countries sought precautionary financing. - ECF usage: - The ECF has remained central; around 30 ECF arrangements in place in any given year. - Composition of ECF users has changed as some countries graduate and others move from emergency to medium-term support. - No low-access ECF arrangements requested since the onset of the crisis. - Interviews indicated the new facility name reduced perceived stigma in some cases. - SCF and precautionary support: - The SCF (and previously ESF-HAC) helped LICs deal with turbulence; demand for precautionary support is growing. - Seven countries requested support under ESF-HAC during 2008–09. - Since 2010, four SCF-supported programs have been requested (Solomon Islands in 2010 and 2011, Honduras, and Georgia), of which three were on a precautionary basis. - Country authorities and mission chiefs indicate greater interest in precautionary support given an increasingly uncertain global outlook. *Source: _072612 - Executive Summary* ### 12. The RCF has provided rapid low-access financing in a wide range of emergency ### _072612 - 12. The RCF has provided rapid low-access financing in a wide range of emergency ### Use across country groups - Since 2008, 14 countries have requested support under the RCF and previous emergency facilities (ESF-RAC, ENDA, and EPCA), including five that used such emergency financing more than once. - The strongest increase in demand came from small economies hit by natural disasters. - Some countries affected by the global crisis also requested support under the RCF. - A few countries requested the RCF to address urgent balance of payments needs arising before domestic political conditions were appropriate to move to ECF support. - PSI usage since 2008: - Six LICs that had achieved broadly stable and sustainable macroeconomic positions sought support under the PSI. - The PSI facilitated rapid access to short-term financing during the crisis (Senegal in 2008, Mozambique and Tanzania in 2009). - PSI users have remained relatively small and confined to Sub-saharan Africa. - Trends across regions and country groups (2009-12): - Sub-saharan Africa: LICs have traditionally been the heaviest users and further increased engagement after the facilities reform. - Asia Pacific: Least frequent users; currently only one ECF and one SCF arrangement in place among LICs in the region. - Western Hemisphere: Increasing reliance on LIC facilities, particularly the RCF and previous emergency assistance tools. - Middle East, Central Asia, and Europe: Sharpest increase in usage, driven by the global crisis. - Income and vulnerability: - Over two-thirds of countries with per capita income below the IDA operational cutoff have used a LIC facility or instrument in a given year since 2009. - Use of LIC facilities increased for both below-IDA and above-IDA groups relative to the pre-crisis period, driven by SCF, RCF, and PSI support. - In the group of LICs with some market access, five out of the six countries that requested Fund financial or policy support relied on an instrument other than the ECF. - Small economies and fragile situations: - Prior to the reform, around one-quarter of small PRGT-eligible countries used Fund facilities in a given year; since 2009, more than half have sought support under a Fund facility. - Use of the RCF is even more pronounced for small island economies. - Prior to 2009 reforms, just over a third of LICs in fragile situations used the Fund’s facilities in a given year; since 2009, almost two-thirds of fragile LICs have engaged with the Fund, mainly through the ECF and to a lesser extent the RCF. - Some ECF-supported program implementations proved difficult in fragile cases, in part reflecting institutional capacity constraints. *Italic: Source: IMF PDF chapter "_072612 - 12. The RCF has provided rapid low-access financing in a wide range of emergency" (as supplied).* ### Access, Blending, and Financing Terms - Access changes and totals: - The 2009 reforms doubled access levels and overhauled access policies. - Total annual access as a share of total quota of all LICs increased from an average of about 6 percent during 2000–08 to 13 percent in 2009–12. - Average concessional credit outstanding of PRGT users increased from 47 to 76 percent of quota between end-2008 and June 2012. - Concessional commitments in 2010 and 2011 were three times higher than in the five years before the reform of the facilities. - Augmentations and facility usage: - Average access in percent of quota for new financing requests increased across all facilities, particularly for shock-related financing through ECF augmentations and short-term/emergency tools. - Augmentations were used extensively in 2009, with nine countries requesting augmentations in 2009 alone. - The average size of augmentations increased to 32 percent of quota since the reform, compared to 15 percent of quota in 2000–08. - Distribution of PRGT use: - PRGT resources were used most extensively by more vulnerable countries (fragile situations, below IDA cutoff, net oil importers) as a share of their total group quota in 2009–12. - Pre-completion point HIPCs had higher average access than the LIC group as a whole. - Small economies, including Caribbean states relying heavily on the RCF, had comparatively low access. - Blending: - Blending of concessional with GRA resources has increased following the 2009 reform. - Strengthened blending policies ensured LICs with relatively higher income per capita relied on blending more consistently. - Blending allowed higher overall access compared to PRGT-only financing, albeit on somewhat less concessional terms. - Financing terms and interest relief: - A new interest rate mechanism links interest rates paid on PRGT credit to the SDR interest rate, based on biennial reviews. - Exceptional interest relief—zero percent interest on all outstanding concessional credit—was adopted to assist LICs during the global crisis and extended through end-2012. - The financial impact of this exceptional relief was relatively modest, but survey evidence indicates it was strongly welcomed by country authorities. *Italic: Source: IMF PDF chapter "_072612 - 12. The RCF has provided rapid low-access financing in a wide range of emergency" (as supplied).* ### Design of PRGT Arrangements - Flexibility in program design and conditionality: - The Fund’s conditionality framework was reformed in March 2009 to discontinue structural performance criteria in all Fund arrangements and to rely solely on a review-based approach to monitor structural reforms. - More than 90 percent of country authorities and mission chiefs agreed program design and implementation has been sufficiently flexible to accommodate evolving circumstances. - Only a few programs have used ECF-specific flexibility to link structural measures to completion of reviews rather than specific dates. - Debt limits policy: - The 2009 reform of the debt limits policy links limits on nonconcessional external borrowing to countries’ individual debt vulnerabilities and macroeconomic and public financial management capacity. - As of end-June 2012, 24 out of the 33 LICs with a Fund-supported program in place are eligible for the more flexible options under the new policy. - About half of active PRGT-supported programs included a non-zero limit on nonconcessional borrowing, up from about a third in mid-January 2009. - A review of the Fund’s debt limits policy is envisaged for late 2012. - PRS documentation flexibility: - ECF and PSI users were allowed more time to prepare a PRS document (by the time of the second review rather than prior to the start of the program). - About two-thirds of ECF users and one-third of PSI users took advantage of this flexibility. - Requirement to have updated PRS documents in place for every subsequent review proved challenging in some cases. - Safeguarding social spending: - Nearly all programs adopted social and other priority spending targets; all but two ECF/PSI/SCF-supported programs approved since 2010 used an indicative target to monitor social and other priority spending. - ECF duration extensions: - Assistance under an ECF arrangement is available for an initial three-year term and the 2009 reform made it extendable for up to a total of two additional years. - Since 2009, five countries have extended their ECF arrangements beyond four years. *Italic: Source: IMF PDF chapter "_072612 - 12. The RCF has provided rapid low-access financing in a wide range of emergency" (as supplied).* ### Economic Outcomes - Roles of longer-term programs and short-term financing: - New empirical evidence suggests longer-term IMF program support has helped LICs support economic growth and build macroeconomic buffers; short-term financing during the crisis helped preserve vital spending and facilitated a rapid recovery. - Assistance supported crisis response through two channels: building stronger macroeconomic buffers prior to the crisis and sharply stepping up financial support at the height of the crisis. - This combination allowed LICs to mount a countercyclical fiscal policy response in 2009. - Long-term engagement benefits: - A study covering 1986–2010 finds LICs with long-term Fund engagement (at least five years per decade) experienced significantly higher real per capita GDP growth, tax revenue, FDI, institutional quality, and social spending, and significant reductions in poverty, inflation, external debt, and growth volatility. - These results do not seem to depend on the amount of Fund financing provided over the longer term. - Crisis-period fiscal and spending outcomes: - The Fund’s sharp increase in financial assistance during the crisis helped relax liquidity constraints, allowing countries to preserve vital spending and facilitate a rapid recovery. - Many LIC programs allowed for substantial fiscal and external accommodation in 2009, which may have helped limit the growth decline. - Countries supported by an IMF program were able to increase real spending more than non-program countries; countercyclical fiscal responses in 2009 helped cushion adverse growth impacts. - Empirical findings show Fund financial support has the most impact when LICs face substantial short-term imbalances or shocks; stepped-up financing through ECF augmentations or short-term/emergency facilities (SCF, RCF) is positively associated with short-term growth and macroeconomic stability indicators. - Protection of social spending: - Over the longer term, social spending has tended to increase more in real terms in countries with longer-term IMF program support. - During the crisis, government spending on social sectors and public investment tended to increase in countries with Fund-supported programs, helping mitigate negative impacts on growth and the poor. - Many countries strengthened social protection measures that had been found wanting during the 2008 food and fuel price crisis. - Social spending continued to increase in real terms in most LICs with Fund-supported programs in 2010–11. *Italic: Source: IMF PDF chapter "_072612 - 12. The RCF has provided rapid low-access financing in a wide range of emergency" (as supplied).* ### 33. Looking ahead, the central challenge to be addressed in this review is how to ### _072612 - 33. Looking ahead, the central challenge to be addressed in this review is how to ### Central challenge and context - Preserve the Fund’s ability to provide effective policy and financial support in the face of a sharp prospective drop in the PRGT’s lending capacity after 2014. - PRGT role during crisis: played an effective role in helping many LICs navigate the global financial crisis; LIC financing needs expected to diminish from recent levels as the crisis abates but LICs remain highly exposed to global risks and volatility. - Demand for concessional loans projected to substantially outstrip available resources from 2015 onward, requiring choices on how to secure additional resources. ### A. Resources and Demand — key findings and projections - PRGT annual concessional lending capacity during 2012–14: about SDR 2.2 billion. - If demand is about SDR 1.6 billion annually (the average for 2009–11), lending at this level could be supported for another year, or available resources at end-2014 could support a modest increase in longer-term lending capacity. - Projected demand for 2015-34: in the range of SDR 1.2–1.9 billion a year. - Projected PRGT lending capacity after 2014: - Annual average of only SDR 0.7 billion in nominal terms. - SDR 0.8 billion if demand through 2014 turned out at the lower end of projections. - From the mid-point projection of SDR 1.5 billion, alternative scenarios: - Fall to SDR 1.2 billion if the three largest PRGT-eligible countries (by quota) did not draw again. - Fall to SDR 1.3 billion if per capita GDP growth in LICs was 2 percentage points higher than in the baseline. - Increase to SDR 1.7 billion if countries were to graduate three years later than under the baseline. - Increase to SDR 1.9 billion assuming access to the PRGT is 50 percent above the baseline in blend cases. - Projected annual lending capacity of SDR 0.7 billion is subject to significant uncertainties (interest rates paid to loan contributors, LIC demand, investment returns on the Reserve Account, timing of resolution of protracted arrears cases) and would represent a gradual erosion of real lending capacity. ### Options to fill the gap between projected demand and PRGT lending capacity - Option 1 — Use of gold sale windfall profits: - Remaining windfall profits from gold sales: SDR 1.75 billion. - Using these to replenish subsidy resources would raise the Trust’s annual self-sustaining lending capacity from about SDR 0.7 billion to SDR 1.1 billion. - To ensure sustainability, if demand rose above the low-case scenario, subsidy resources could be supplemented or conserved through: - Temporary suspension of reimbursement to the GRA for the PRGT’s administration costs: would yield some SDR 65 million annually and raise the PRGT’s lending capacity by an additional SDR 0.3 billion per year. - Ad hoc bilateral fundraising in severe global crises (as in 2009). - Option 2 — Establish a regular fundraising mechanism: - Additional financing needs would be in the range of SDR 0.1 billion (low case) and SDR 0.3 billion (high case) per year. - Required scale would far exceed levels raised in recent ad hoc efforts and face severe budgetary pressures among many traditional donors. - When demand exceeds the low case, resources could be mobilized through top-up fundraising and/or temporary suspension of reimbursement to the GRA. - If new concessional resources cannot be secured: - Access to the PRGT would need to be sharply curtailed after 2014, jeopardizing the Fund’s ability to provide adequate support to LICs. - Adopting more stringent graduation criteria is unlikely to yield substantial savings near-to-medium term. - To reduce demand to the existing PRGT self-sustained envelope of SDR 0.7 billion per year, average access to PRGT resources would have to fall to 0.04 percent of eligible LICs’ GDP, implying: - Decline of more than 60 percent relative to access over 2003–08. - Decline of 75 percent relative to the expected access over 2009–14. - Alternatively, a cut of some 40 percent in access in nominal SDR terms may be needed to close the gap for the period 2015–20. ### B. Access Policies, Financing Terms, and Blending — findings and proposals - Access: general observations - Current access levels in SDR terms remain on average broadly adequate for now; future adjustments will depend on available resources. - A large majority of country authorities and mission chiefs considered current access levels broadly appropriate. - Access norms and limits remained broadly stable relative to indicators of demand; demand has tended to be broadly symmetric around the norms. - Recommendation when the 14th General Review of Quotas becomes effective: - A concurrent lowering of access limits and norms in percent of quota would be called for. - Since quotas would double in SDR terms, there would be significant resource implications if access norms and limits remained unchanged in percent of quota. - Strong case for reducing access norms and limits in percent of quota by up to 50 percent when the 14th quota review becomes effective. - Resources permitting, access levels in SDR terms should be increased in the future to keep up with projected demand; conversely, if self-sustaining capacity cannot be increased beyond the existing level, a cut of some 40 percent in nominal SDR access may be needed for 2015–20. - Targeting access to country-specific needs - Scope for more efficient use of PRGT resources by better tailoring access to individual balance of payments needs. - Observed issues: - New access norms have exerted a strong gravitational pull; access has been at the relevant norm for more than half of all ECF arrangements approved after the reform. - For blended PRGT-GRA financing, access to the concessional component has often been at or close to the limit (concessional component limited to 50 percent of quota on an annualized basis), sometimes exceeding the norm for PRGT-only arrangements. - In some cases cumulative PRGT access limits (300 percent of quota) may be overly restrictive and have threatened to constrain financing below levels commensurate with balance of payments needs and repayment capacity. - Sub-limits on cumulative access to the RCF may unduly constrain response to urgent financing needs for small islands prone to frequent natural disasters and fragile situations. - Possible merit in raising the cumulative access limit on the RCF from 75 to 100 percent of quota, and from 100 to 125 percent of quota to address exogenous shocks, while leaving annual sub-limits unchanged. - Financing terms - Financing terms of PRGT loans appear, on average, to strike the right balance between concessionality and lending capacity. - Trade-off: concessionality versus the amount of liquidity support available from scarce subsidy resources. - Record low global interest rates have reduced the grant element of PRGT loans to well below 35 percent, notwithstanding the Fund’s zero interest policy. - Increasing concessionality by lengthening maturities to more than ten years would tie up scarce resources for a relatively long time and limit ability to meet new needs. - Most country authorities and mission chiefs considered current PRGT financing terms broadly appropriate. - Repayments to the Fund appear manageable with annual projected debt service below (text ends here). *Source: _072612 - 33. Looking ahead, the central challenge to be addressed in this review is how to — https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_072612.pdf* ### 0.8 percent of GDP in all LICs for the next five years. ### 0.8 percent of GDP in all LICs for the next five years. ### Differentiation of financing terms across LICs - Current differentiation: by facility type (SCF subject to somewhat lower concessionality than the ECF and RCF) and by a 2009 presumption of blending that in effect hardens financing terms for higher-income LICs (with some exceptions). - Problem: With the exception of higher-income LICs that meet the presumption for blending, financing terms (and de facto access to PRGT resources based on norms and limits) are identical for the poorest and most vulnerable LICs and some of the most advanced LICs (e.g., including those that may even have some capital market access). - Problem: Financing terms are not linked to the amount of total access. This implies that higher-access requests remain fully subsidized and have an accordingly large negative impact on the concessional resources available to other LICs. - Note on PRGT concessionality: The 2009 reform included a new interest rate mechanism that implies an average grant element of PRGT lending of around 35 percent under ―normal‖ world interest rates, and smoothes concessionality as world interest rates fluctuate. ### Options for better tailoring access and financing terms - Contingent tranches - Could align disbursements more closely to actual balance of payments needs while keeping access levels on average broadly unchanged. - Design: set the access norm for ECF and SCF at an appropriate base level, and define a pre-specified (relatively low-access) tranche that can be activated in the event of an urgent unforeseen balance of payments need, without a review if the program is on track. - Operational note: a rule would be needed to determine how long the contingent tranche would remain available relative to completed and scheduled reviews and test dates. - Contingent tranches could be broadly cost neutral by setting base access and contingent access so average access across countries remains broadly unchanged. - Greater differentiation through blending or interest rates - Proposal: set the interest rate for the poorest and most vulnerable LICs to zero, given their uncertain economic prospects. - Trade-off: The cost would need to be offset; applying a zero rate to all PRGT lending could lower the self-sustaining lending capacity of the PRGT by about 10 percent (order of magnitude). - Possible offsets: - Reduce or eliminate subsidization of access above a certain level (e.g., when access exceeds the applicable norm or limit) for LICs that are not in the poorest and most vulnerable group and have adequate debt service capacity. - Two implementation approaches: - Interest rate surcharges for less vulnerable LICs: an interest surcharge on access amounts exceeding a certain level could apply to all LICs except the poorest and most vulnerable; additional surcharges could apply for exceptional access. - Broadening the presumption of blending: include an additional presumption that access above a certain level would be provided through blended financing except for the poorest and most vulnerable countries. - Advantages of broader blending: - Conserve PRGT loan resources. - Provide more flexibility when PRGT access limits constrain the ability to meet financing needs of higher capacity countries. - Promote differentiation of access to the PRGT according to countries’ capacities and income levels. - Drawbacks of blending and surcharges: - Blending: effective financing terms would fluctuate alongside the SDR interest rate, creating uncertainties for borrowers. - PRGT surcharges: would require differentiating interest rates for the same facility across sub-groups while country classifications change over time, leading to operational difficulties. - Operational complexity: hardened terms would need to be applied according to country-specific criteria—such as per capita income, market access, institutional capacity, and debt sustainability—to ensure uniformity of treatment. ### Debt relief considerations - Flexible repayment terms (e.g., loans with a floating grace period) can help mitigate debt service risks but raise operational and legal difficulties for the Fund given short repayment periods and the revolving nature of IMF credit. - The Fund can join international debt relief efforts in the wake of catastrophic natural disasters under the Post-Catastrophe Debt Relief (PCDR) Trust; outside the HIPC Initiative, PCDR allows debt stock relief only as part of a multilateral debt relief effort when poor countries are hit by catastrophic natural disasters. - Suggestions to expand PCDR coverage to situations where multilateral debt relief would be essential to restore sustainability after bilateral relief efforts have been exhausted raise policy challenges: - Difficulty in defining such situations ex ante and in setting aside resources for contingencies. - Anticipation of debt relief could sit uneasily with the Fund’s preferred creditor status. - A feasible refinement: clarify the circumstances under which the Fund would consider across-the-board interest relief, as done during the 2009–12 crisis period. ### Precautionary and policy support for LICs - Rationale: LICs’ vulnerability to global volatility has increased due to deeper integration into international markets, increased volatility of global commodity prices, and a global outlook subject to severe downside risks. - Role of contingent financing and IMF policy support: - Contingent financing can insure LICs against sudden shocks, especially those reliant on private capital inflows. - IMF policy support can help build stronger macroeconomic frameworks that facilitate donor support and private investment flows and enable robust domestic policy responses. - Gaps in the current toolkit - Countries with protracted balance of payments problems due to structural and institutional weaknesses but no immediate financing needs may not qualify for PSI or SCF; the low-access ECF has been used but is seen as a negative signal since creation of the PSI. - Constraints on SCF precautionary use: - The 2.5-out-of-5-year limit on SCF use constrains support during protracted global risks (countries such as Honduras and Solomon Islands are bumping up against this limit). - The 50 percent of quota annualized access limit is low compared with RCF support of up to 50 percent of quota for exogenous shocks with much lower conditionality. - The availability fee with current exceptional interest relief implies treating an SCF arrangement as precautionary is more expensive than drawing. - The PRGT lacks an instrument for the most advanced LICs analogous to the FCL/PLL in the GRA that can provide relatively high upfront contingent access, send a strong signal to investors and donors, and rely on ex-ante qualification criteria with flexible monitoring. - PSI sends a positive signal but involves stringent conditionality and does not provide automatic access to financing. - Trade-offs in creating a new precautionary instrument - Qualification would have to be limited to the most advanced and globally integrated LICs who would likely seek relatively high levels of upfront access. - Allocating scarce concessional funds to these countries may crowd out traditional support to poorer LICs. - Two constrained options: - Blend the new instrument with GRA resources (difficult to identify an appropriate instrument). - Draw fully from PRGT with minimal or no subsidization beyond a threshold access level (a substantial increase in PRGT credit could reduce capacity to provide other forms of support). - Creating a new instrument would pose operational and design challenges, including delineation from existing instruments. - Efficiency considerations for precautionary support - Contingent financing can be efficient internationally by reducing reliance on costly self-insurance (reserve build up) that ties up resources for development spending. - While precautionary instruments tie up PRGT loan and subsidy resources for the duration of arrangements, resources become available again if no actual balance of payments needs arise during the arrangement. - If appropriately designed, actual subsidy costs of contingent financing over the longer term may not be much larger than those from ex post support (e.g., disbursing SCF requests after shocks). - Design elements to mitigate moral hazard and misuse include explicit representation that drawings respond to actual balance of payments needs and possible ex post remedial measures when drawings are made without such needs. ### Key numerical and technical points preserved exactly - The 2009 reform implies an average grant element of PRGT lending of around 35 percent under ―normal‖ world interest rates. - Applying a zero rate to all PRGT lending could lower the self-sustaining lending capacity of the PRGT by about 10 percent. - The temporary interest rate waiver on PRGT loans extends through end-December 2012; the applicable interest for 2013 would be: zero percent for all ECF and RCF loans; 0.25 percent for SCF loans; existing ESF loans and subsidized ENDA/EPCA credits. - SCF limits and constraints cited: - 2.5-out-of-5-year limit on the use of the SCF. - 50 percent of quota annualized access limit (SCF) versus RCF support of up to 50 percent of quota in the event of exogenous shocks. * _072612 - 0.8 percent of GDP in all LICs for the next five years.* ### 53. A more feasible approach would be to increase the flexibility of the current ### _072612 - 53. A more feasible approach would be to increase the flexibility of the current ### Increasing flexibility of LIC facilities — specific options - Relaxing access and timing restrictions on the SCF: - Do not count arrangements without drawings against the "2.5-out-of-5-year" limit. - Allow precautionary support during protracted uncertainty while maintaining the episodic nature of SCF disbursements. - Combine with a higher annualized access limit, e.g., "75 percent of quota". - More explicit recognition of the ability to frontload access. - Refining the ECF to enhance precautionary and policy support: - (i) Introduce pre-specified contingent tranches as proposed in Section III.B, or allow augmentations between reviews (e.g., up to the RCF access limit). - (ii) Give ECF users the option of eschewing disbursements when the member’s balance of payments position improves during the arrangement period, thereby allowing countries to build a buffer of access to draw on later in the event of unforeseen needs. - Note: Some mission chiefs suggested allowing full precautionary use of the ECF from the outset, but concerns relate to the Fund’s principle that countries with "protracted balance of payments problems" would normally have an actual or projected financing need over the course of an ECF arrangement. - PSI flexibility and usability: - Automatic access to finance for PSI users is not possible without making the PSI effectively a financial facility. - Enhance flexibility by: adjusting review schedules, reducing PRS documentation requirements (as discussed in Section III.D), and/or abolishing Assessment Criteria (ACs). - Broaden pool of potential PSI users by basing qualification more on the sustainability of macroeconomic policies and less on broader measures of institutional capacity and development. ### Design of PRGT arrangements — observed issues and streamlining opportunities - Many members used increased flexibility under the 2009 reforms, but recent experience shows areas for further streamlining and flexibility. - PRS linkages and procedural hurdles: - ECF and PSI reviews (starting with the second review) require a PRS document issued to the Board normally within the previous "18 months". - In effect, the production of Annual Progress Reports (APRs) has become a requirement for Fund support. - APR production can be cumbersome and procedural difficulties have led to delays of on-track reviews or rushed PRS processes, undermining the link between Fund-supported programs and country-owned strategies. - This strict link between PRS documents and individual disbursements does not exist at the World Bank. - Interim IMF-specific options to refocus PRS linkages on substance: - Allow completion of a review under an ECF arrangement and PSI to be met by including a detailed description in the Letter of Intent (LOI) or Memorandum of Economic and Financial Policies (MEFP) of how the country’s current or future budget and planned structural reforms advance PRS implementation, when a full PRSP covering the relevant period is already in place. - Change policy on Joint Staff Advisory Notes (JSANs) to allow JSANs to be submitted for information (rather than discussion) when combined with a Lapse of Time (LOT) program review or Article IV consultation, or as a stand-alone paper when no Board documents are expected within "four months" after the issuance of the JSAN. ### Lapse of defunct arrangements - Current rule: ECF and SCF arrangements cannot be terminated early unless the member requests so; PSI terminates automatically upon non-completion of two consecutive reviews (or after "12 months" with no review if used concurrently with the SCF). - Problem: Programs can go off track soon after approval but remain in place without disbursements, tying up scarce PRGT resources and providing no clear signal that program design has become obsolete. - Proposed framework to address defunct programs: - Notify members when no review has been completed over the past "12 months", indicating the arrangement will expire in "six months" unless the program is brought back on track, including by reaching new policy understandings based on updated circumstances. - Since 2009, six ECF arrangements would have been affected by such a "lapse" rule; in none of these was more than one review completed following approval. - This would be stricter than the approach for GRA arrangements but may be justified given the scarcity of concessional resources. ### Length and phasing of ECF arrangements and disbursements - Length of ECF arrangements: - Current rule: initial approval for an ECF arrangement is "three years", with extensions of up to two additional years possible. - Since 2010, there have been "23 requests" for extensions of ECF arrangements, with multiple requests for the same program resulting in extensions of about "one year, on average". - Despite the option to extend for up to two years, the average number of days for ECF extensions has remained almost unchanged. - Proposal: Give an option for arrangements with longer initial durations (to better align with five year PRSP cycles and blended financing needs); resource implications likely limited since ECFs are often extended, augmented, and used repeatedly. - Terminating defunct arrangements could limit the risk of tying up resources. - Phasing of disbursements: - Current rule: disbursements under ECF and SCF must be phased at semiannual intervals, with reviews and conditionality; quarterly reviews/disbursements possible when closer monitoring is needed. - Other frequencies (e.g., "three times a year", or varying intervals) are not permissible. - Proposal: Make phasing of disbursements fully flexible with the sole condition that disbursements be at least "semi-annual". ### Issues for discussion (summary of questions for Directors) - Do Directors agree the new architecture of LIC facilities is broadly appropriate and that the Fund largely met LIC needs in recent years? - Do Directors agree a sustainable concessional financing framework requires substantial additional subsidy resources while making efficient use of available resources? Which approaches in Section III.A are most promising to ensure longer-term sustainability of the PRGT? - Do Directors view current average access levels in SDR terms as broadly appropriate? Do Directors agree that access in terms of quota will need to be reduced when the "14th" quota review becomes effective? - Do Directors agree that greater tailoring of access and financing terms to country-specific needs and capacities would make Fund resources more efficient? If so, which options in Section III.B are worth exploring? - Do Directors agree there is merit in strengthening the Fund’s ability to provide contingent financing to LICs to limit their need for self-insurance? If so, which broad approaches in Section III.C are most promising? - Do Directors see merit in exploring the modifications to PRGT arrangement design set out in Section III.D? ### Box 3 — Summary of possible refinements (main objectives and main refinements for consideration) - Creating a sustainable concessional financing framework beyond 2014: - Two main options for raising additional resources: (i) Use additional gold windfall profits, or (ii) Regular large-scale fundraising. - Supplemented by contingent mechanisms when demand exceeds supply, e.g., temporary suspension of GRA reimbursement subject to the terms of the relevant Board decision. - Maintain access in SDR terms broadly unchanged for now, including by halving access in quota terms when the "14th" review of quotas becomes effective. - Periodically increase access in the future as demand rises in SDR terms, resources permitting. - Making the most efficient use of PRGT resources by tailoring access and financing terms: - (i) Supplement base level of ECF/SCF access with contingent tranches for unexpected urgent needs. - (ii) More concessional terms for the poorest and most vulnerable LICs and greater use of blending for higher-access requests of other countries. - (iii) Modest relaxation of cumulative RCF sub-limit. - Enhancing LICs’ access to contingent financing and policy support while limiting use of additional subsidy resources: - (i) Relax limits on SCF. - (ii) Make PSI more flexible. - (iii) Refine options for ECF use. - Streamlining and enhancing operational flexibility under PRGT arrangements: - (i) When PRSP exists, tie reviews to MEFP discussion of PRS-program linkages, as an alternative to an APR. - (ii) Allow LOT consideration of JSANs. - (iii) Framework for terminating defunct arrangements. - (iv) Provide options for longer initial duration of ECFs. - (v) Allow more flexible phasing of disbursements. *Source: Excerpt from IMF document _072612 (pages 32–39) — proposals and discussion on increasing flexibility and design of LIC/PRGT facilities.* ### 1. Count of countries with LIC facilities or instruments in place, by instrument group 1/ ### 1. Count of countries with LIC facilities or instruments in place, by instrument group 1/ ### Counts of countries with LIC facilities or instruments in place (panel 1) - Currently PRGT-eligible: 40 44 44 45 44 43 42 40 37 40 48 48 48 43 42 - ECF 2/: 33 34 14 24 24 20 36 34 30 28 27 31 31 29 - o/w blends: 11 ------ 1 - 2 2 2 - SCF group 3/: -------- 16 8 3 3 - o/w blends: --------- 1 2 2 - o/w ESF-HAC: -------- 3 7 6 1 - - o/w precautionary: ---------- 1 2 3 - RCF group 4/: 3 11 22 42 15 10 4 23 - o/w ESF-RAC: -------- 1 9 3 -- - o/w ENDA: -- 1 2 1 2 -- 2 -- 1 - - o/w EPCA: 3 2 1 1 1 2 2 1 3 2 --- - PSI: ----- 1 3 6 5 5 6 6 6 - o/w with financing: -------- 1 3 3 -- - Memo items: - Stand-alone SBA or EFF: 4 2 1 1 1 1 - 2 3 2 11 - SMP: -1 3 3 8 10 5 4 2 2 1 - - Graduate LICs 5/: 3 4 4 4 3 2 1 2 4 --- - Total LIC facilities (all PRGT-eligible at the time): 43 48 48 49 47 45 42 38 42 52 48 48 43 42 ### Count of LIC instruments or facilities in place (panel 2) - Currently PRGT-eligible: 37 43 44 45 42 41 42 39 39 52 50 44 41 - ECF 2/: 34 41 42 42 40 36 37 32 26 30 31 31 28 - o/w blends: 11 ------ 1 - 2 2 2 - SCF group 3/: -------- 37 8 3 3 - o/w blends: --------- 1 2 2 - o/w ESF-HAC: -------- 3 7 6 1 - - o/w precautionary: ---------- 1 2 3 - RCF group 4/: 3 22 32 42 15 10 5 44 - o/w ESF-RAC: -------- 1 9 5 4 4 - o/w ENDA: -- 1 2 1 2 -- 2 -- 1 - - o/w EPCA: 3 2 1 1 1 2 2 1 3 2 --- - PSI: ----- 1 3 6 5 5 6 6 6 - o/w with financing: -------- 1 3 3 -- - Memo items: - Stand-alone SBA or EFF: 4 2 1 1 1 1 - 2 3 2 11 - SMP: -1 3 3 8 10 5 4 2 2 1 - - Graduate LICs 5/: 3 3 3 4 4 2 1 1 1 1 --- - Total LIC facilities (all PRGT-eligible at the time): 40 46 47 49 46 46 44 44 40 40 53 50 44 41 ### Count of newly approved LIC facilities or instruments (panel 3) - Currently PRGT-eligible: 13 13 12 11 12 9 12 13 8 19 19 22 11 9 - ECF 2/: 10 2 10 1 9 9 7 8 9 4 9 6 12 5 6 - o/w blends: -------- 1 - 2 -- - SCF group 3/: -------- 3 4 2 1 1 - o/w blends: --------- 1 1 - 1 - o/w ESF-HAC: -------- 3 4 --- - o/w precautionary: ---------- 1 1 1 - RCF group 4/: 4 3 - 2 2 3 1 1 7 9 2 5 2 - o/w blends: -------- 1 -- 1 - - o/w RCF, ESF-RAC: -------- 1 8 2 4 2 - o/w ENDA: -- 1 1 1 1 -- 2 -- 1 - - o/w EPCA: 3 - 1 1 1 2 1 1 4 1 --- - PSI: ----- 1 3 3 -- 6 -- - o/w with financing: ------------- - Memo items: - Stand-alone SBA or EFF: 2 - 11 ---- 22 --- - SMP: -1 3 3 2 7 6 4 4 2 - 1 - - Graduate LICs 5/: - 2 1 1 - 1 1 ------ - Total LIC facilities (all PRGT-eligible at the time): 13 13 12 12 9 13 1 3 1 4 8 19 19 22 11 9 ### Notes attached to counts - 1/ Shows one facility/instrument per country, based on the length of use in the year. - 2/ Previously PRGF. Includes ECF-EFF blends. - 3/ Includes ESF-HAC (ESF), ESF-SBA, and SCF-SBA blends. - 4/ Includes RCF, ESF-RAC, EPCA, ENDA, and blends. - 5/ In 2010 six countries graduated from the PRGT-eligible group: Albania, Angola, Azerbaijan, India, Pakistan, and Sri Lanka. - 6/ Count of facilities under broader categories (same type within a year counts as one). *Table 2. Facilities and Instruments in Place for Current PRGT-Eligible Countries; 2000–12 (As of end-June 2012)* ### Use of LIC facilities, including blends (selected group shares, Table 2) - All LICs (72): 56 60 51 42 07 48 28 82 3 - AFR (35): 74 78 67 58 16 56 51 61 - - APD (16): 22 16 20 2 - 9 15 -- 15 - MCD/EUR (12): 52 67 51 60 16 - 6 -- 28 - WHD (9): 51 64 44 31 - 8 72 5 -- 103 - Small Economy (17): 26 54 20 24 - 9 41 82 6 31 - Not Small Economy (55): 65 62 60 48 17 45 29 23 - Fragile (24): 39 57 33 52 - 4 76 -- 03 - Not Fragile (48): 64 62 60 38 19 29 31 23 3 - Net Oil Exporter (10): 47 28 39 28 -- 4 10 3 -4 - - Net Oil Importer (62): 57 66 53 45 18 48 29 23 - Exchange Rate Regime: - Float (26): 61 63 57 48 07 15 41 23 6 - Fix (46): 53 59 47 39 08 51 01 6 21 - Monetary Union (16): 72 80 63 58 13 92 01 6 2 - - Not Monetary Union (56): 51 55 48 38 08 24 38 24 - IDA Cutoff: - Below IDA Cutoff (46): 66 70 61 54 18 47 21 0 -- - Above IDA Cutoff (26): 38 43 32 22 - 7 31 13 46 8 - Market Access (8): 47 56 43 13 11 91 19 31 19 - HIPC status at end-2009: - Post-CP (26): 88 81 82 57 11 25 24 18 21 - DP and pre-DP (13): 40 63 35 62 -- 6 10 ---- - non-HIPC (33): 37 43 32 23 07 21 22 33 35 - Memo item: PRGT-eligible Graduates 6/: 4 4 4 4 -- 2 --- 68 1/ Sum of country years with facility in place as a share of total country years for each country group. 2/ Number of countries in the group in parentheses. Country group definitions use 2010 data unless otherwise indicated. *Table 3: Use of IMF Facilities and Instruments for PRGT-Eligible Countries, by Country Group (As of end-June, 2012; Percentage of Years with Facility or Instrument in Place) 1/* ### Period averages and access (Table 4, selected figures) - Average annual commitments in percent of total country group quota (period averages, All PRGT Programs): - All LICs (72), 2000-08: 6.4; 2009-12: 13.0; 50.2? 80.0 (as tabulated) - Average annual access in percent of quota (All PRGT Programs, period averages): - All LICs (72): 6.4 13.0 50.2 80.0 - By country group (selected): - AFR (35): 6.5 13.2 47.2 90.0 - APD (16): 6.2 10.6 59.1 80.0 - MCD/EUR (12): 6.1 17.8 54.0 86.6 - WHD (9): 7.2 5.4 56.2 45.0 - Fragile (24): 8.6 17.6 56.8 83.4 - Not Fragile (48): 5.6 11.0 47.1 78.3 - Memo item: PRGT-eligible Graduates (6): 2.8 - 5 2.5 - 1/ Period average of total annual PRGT commitments at the time of approval as a share of total group quota. 4/ Period average of access (in percent of quota) of new PRGT commitments within a year and country group. *Table 4: Access (New PRGT Commitments) by Country Group 1/ (As of end-June 2012; Period average)* ### PRGT Credit Outstanding (Table 5, selected figures) - Group averages and totals (percent of quota) — selected rows: - All LICs (72): 57.4 30.3 51.8 75.0 47.1 76.4 - AFR (35): 63.2 26.9 57.2 77.7 43.0 79.1 - APD (16): 25.5 31.1 22.9 50.9 40.7 43.6 - WHD (9): 83.3 32.7 35.3 82.7 57.9 75.3 - Net Oil Importer (62): 69.1 40.4 66.8 75.3 50.3 80.7 - Memo item: PRGT-eligible Graduates (6): 11.1 14.5 3.0 60.3 51.1 15.7 1/ Zimbabwe is not PRGT-eligible due to its removal from the PRGT-eligibility list by an Executive Board decision in connection with its overdue obligations to the PRGT. 2/ Excludes Kyrgyz Republic, which became non HIPC-eligible in November 2011 based on end-2010 indebtedness criterion. 3/ Since 2010, six countries have graduated from the PRGT-eligible group: Albania, Angola, Azerbaijan, India, Pakistan, and Sri Lanka. *Table 5: PRGT Credit Outstanding — Group Average of Credit Outstanding in Percent of Quota; Group Total Outstanding Credit as a Share of Total Group Quota* ### Appendix I — Summary of Facilities and Instruments for Low-Income Countries (key parameters) - Extended Credit Facility (ECF) - Duration: ≧ 3 years (in any case > 2 years); 3-year duration, extendable to 5 years. - UCT conditionality: Required. - Balance of payments need: Present or prospective BoP needs exist over course of 3-year arrangement; present need not necessary for each disbursement. - Access norm: 120% of quota (or 75% if outstanding PRGT credit >= 100% of quota). - Annual/cumulative limit: 100/300% of quota. - PRS document required by 2nd review. - Standby Credit Facility (SCF) - Duration: 1-2-year duration. - UCT conditionality: Required. - BoP needs: Present, prospective, or potential short-term BoP needs; precautionary use possible; disbursements require a present need. - Access norm: 120% of quota (or 75% if outstanding PRGT credit >= 100% of quota) for 18-month arrangement. - Annual/cumulative limit: 100/300% of quota. - Episodic use the norm; no more than 2.5 out of every 5 years. - Rapid Credit Facility (RCF) - Duration: One-off disbursements; repeated use possible based on sudden exogenous shocks or 6-monthly track records. - UCT conditionality: Not needed/not feasible; no ex-post conditionality or reviews. - BoP need: Urgent (present) BoP need must exist; prospective or potential needs may also exist. - Access: No norm. Annual/cumulative limit: 25/75% of quota, or 50/100% in case of sudden exogenous shocks. 5/ - Policy Support Instrument (PSI) - Duration: 1-3 year duration, extendable to 4 years. - UCT conditionality: Required. - BoP need: At approval, BoP needs may exist but expected to be met through non-Fund sources. - Access: No access. On-track PSI facilitates rapid approval of SCF or RCF without need to cancel PSI. - PRS document required by 2nd review. - Staff-Monitored Program (SMP) - Duration: Normally 6-18 months. No Board endorsement. - UCT conditionality: Not required. Purpose is to build a track record toward a UCT-quality program. - BoP needs: Any type or size may exist. - Footnotes: - 1/ For PRGT-eligible countries meeting the blending criteria, concessional financial support should be blended with GRA financing, normally resulting in ECF-EFF, SCF-SBA, and RCF-RFI blends. - 2/ Time needed to establish a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - 3/ UCT conditionality standard implies authorities have commitment and capacity to implement policies adequate to correct external imbalances and enable repayment. - 4/ Balance of payments (financing) needs: present, prospective, or potential (as defined). - 5/ Exogenous shock defined as under the ESF; qualifying events include terms-of-trade shocks, natural disasters, shocks to demand for exports, or conflict/crisis in neighboring countries. ### Appendix II — Blending of PRGT and GRA Resources (policies and limits) - Policy objective: promote more consistent use of blending following 2009 reform. - Presumptions and limitations: - Blending is presumed for PRGT-eligible countries with either (i) per capita income above the prevailing operational cutoff used by IDA44 or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff.45 Other PRGT-eligible countries expected to use concessional financing only. - Blending should normally not be used for countries at high risk of debt distress or in debt distress (as assessed by most recent joint Bank-Fund LIC Debt Sustainability Analysis), even if per capita income or market access creates a presumption for blending. - In exceptional circumstances, when financing needs exceed applicable access limits, blending can be used irrespective of per capita income, market access, and debt sustainability criteria. - When providing blended financial assistance, ECF, SCF, and RCF resources will normally be provided together with GRA resources under the EFF, SBA, and RFI, respectively. - Access to concessional component of blended assistance: - Normally half of total access, subject to a floor on annual average concessional access of 25 percent of quota and a ceiling of 50 percent of quota; remainder met by GRA financing. - In exceptional circumstances (very large BoP needs), concessional access under blended assistance could exceed 50 percent of quota and reach annual access limit of 100 percent of quota or possibly exceptional annual access limit of 150 percent of quota if criteria for exceptional concessional access are met (including that the country does not meet income or market access criteria for blending). 44: As of July 2011, this cut-off was US$1,175. It is revised each year, typically in July. 45: Criterion met if market access criterion for graduation from PRGT eligibility is met. ### Appendix III — The PRGT Interest Rate Mechanism (design and transitional relief) - Design objectives: (i) more concessional financing term structure, (ii) preserve scarce concessional resources, (iii) tailor financing terms to LIC needs and capacity, (iv) limit fluctuations in concessionality and subsidy costs. - Mechanism: review-based adjustment normally every two years; applicable interest rates on outstanding loan balances under ECF, RCF, and SCF depend on prevailing SDR interest rates, with modest differentiation between facilities. - Transitional/exceptional measures: - Board approved exceptional interest relief: zero percent interest on all concessional loans through end-December 2011 and subsidization of the rate of charge to zero percent for subsidized EPCA/ENDA through end-January 2012. - In December 2011, exceptional interest relief was extended by one more year. - Interest Rate Mechanism table (Interest rate for concessional facility, in percent, based on average SDR rate 1/): - If SDR rate < 20.000: ECF 0.25; RCF 0.25; SCF 0.25 - If SDR rate ≥ 20.000 and ≤ 50.250: ECF 0.25; RCF 0.25; SCF 0.50 - If SDR rate > 50.500: ECF 0.50; RCF 0.50; SCF 0.75 1/ The average SDR rate is based on the most recently observed 12-month period. ### Appendix IV — The 2009 Financing Package (resources and gaps) - Objective: boost Fund’s concessional lending capacity to SDR 11.3 billion for 2009–14; target mobilization of new loan resources SDR 10.8 billion. - Estimated subsidy needs: SDR 2.5 billion (end-2008 NPV terms); additional subsidy resources needed: about SDR 1.5 billion (end-2008 NPV terms) after accounting for available subsidy resources. - Sources envisaged: a. New Bilateral Contributions: target SDR 0.2–0.4 billion (end-2008 NPV terms). As of end-June 2012, 26 members pledged total SDR 214 million in bilateral subsidy contributions. b. Delaying PRGT Reimbursement to the GRA: for three years starting FY 2010, transfer equivalent to estimated PRGT operating expenses from PRGT Reserve Account to General Subsidy Account, generating estimated subsidy resources of SDR 0.15–0.2 billion. c. Use of PRGT Reserve Account Resources: SDR 0.62 billion (end-2008 NPV terms) may be transferred to PRGT’s General Subsidy Account. Staff estimated remaining Reserve Account resources would provide annual self-sustaining concessional lending capacity of about SDR 0.7 billion after 2014–15. d. Use of Resources Linked to Gold Sales: Board approved partial distribution of general reserves equivalent to SDR 700 million attributed to windfall profits from recent gold sales, subject to assurances members will provide new PRGT subsidy contributions of at least SDR 630 million. - Summary (Billions of SDRs, end-2008 NPV terms; Billions of US$ cash terms1/): - Estimated subsidy needs: 2.5 SDR; 4.7 US$ - Minus: available resources: 1.0 SDR; 1.9 US$ - Remaining Needs: 1.5 SDR; 2.8 US$ - Sources: - Transfer from PRGT Reserve Account: 0.6 SDR - New bilateral contributions: 0.2-0.4 SDR - Delaying PRGT reimbursement (for 3 years): 0.15-0.2 SDR - Gold sales resources: 0.5-0.6 SDR 1/ Assuming exchange rate of US$ 1.5 per SDR. *Appendices I–IV: Summary of facilities, blending policy, PRGT interest rate mechanism, and 2009 financing package (as presented in the source).* *Italic source: _072612 - 1. Count of countries with LIC facilities or instruments in place, by instrument group 1/_ (Table extracts and appendices; As of end-June 2012).* ### Appendix V. Consultative Process ### Appendix V. Consultative Process ### Consultations with Senior Country Officials - Staff conducted structured interviews with key counterparts in ministries of finance and central banks. - Authorities from 28 PRGT-eligible countries undertook an interview with Fund staff. - Regional and instrument participation: - More than 50 percent of responses were from AFR (16), with a further seven responses from MCD and the remainder from APD and WHD. - The large majority of authorities were those with recent experience of the ECF (20). - Countries with experience of the PSI (3), RCF (2), SCF (1), SMP (1), and surveillance (1) also participated in interviews. - Six of seventeen small states sent responses. - Key findings and views: - General support for the reforms of the LIC toolkit undertaken in 2009 and a broad assessment that the experience so far has been positive. - Many respondents welcomed the increase in access levels for LIC facilities during crisis periods. - Some suggested more extensive use of frontloaded disbursements, particularly in cases of substantial adjustment at the initial program stage; more flexibility for the disbursement profile was seen as helpful. - Mixed views on PRS requirements: - Several authorities stressed that the PRS helped to sharpen their ECF-supported programs and created incentives to accelerate pro-poor policy implementation. - A few countries stressed the lack of substantive linkages between the PRS and Fund-supported program, and noted that fiscal and monetary objectives might constrain the implementation of PRS development agenda. - A few added that the Fund-supported programs were also based on the country’s medium-term economic program, budget bills and monetary authority’s statements. - Some authorities raised concerns about procedural issues related to the need to regularly update PRS documents and monitor social and priority spending. - Views on gaps and instruments: - Most respondents did not see significant gaps in the LIC facilities toolkit. - Some raised the need for a precautionary-type instrument for good performers with less intrusive conditionality requirements than the PSI. - Others thought more clarity and flexibility in assessing qualification criteria might increase demand for the PSI. - Financing terms: - A large majority of respondents considered the current PRGT financing terms broadly appropriate. - The zero-interest policy was very much welcomed and many saw merit in making it permanent. - A few went beyond that by asking for a possible expansion of the grace period to increase the grant element to 35 percent for Fund financing in line with the minimum requirement for external borrowing for many LICs. ### Consultations with Civil Society Organizations (CSOs) - External consultation process: - An online consultation was launched on April 17, 2012 and closed on May 22, 2012. - A teleconference was held on June 27 with the CSOs that participated in the online consultation.47 - Participants included CSOs from developed and low-income countries. - Key CSO feedback: - CSOs welcomed the increased flexibility of the LIC toolkit adopted in 2009, zero interest charges, and the related 2009 financing package. - Concerns were raised regarding financing constraints of Fund-supported programs after the peak of the 2008–09 crisis; a study commissioned by Norwegian CSOs claimed these constraints might have led to reductions in social programs in some countries with IMF-supported programs. - Calls and suggestions: - A general call for a systematic annual assessment of the poverty and social impact of IMF-supported programs. - Some suggested the need for a more uniform definition and report on annual social spending targets to facilitate comparison across countries and regions. - Greater emphasis on domestic revenue mobilization, in particular from natural resource sectors. - Program design should benefit from a broader dialogue on various policy alternatives (e.g., Millennium Development Goal scenarios). - Programs should place greater emphasis on agriculture as a key component of poverty reduction strategies. - The zero-interest policy should be made permanent. - Repayments of Fund financing could be linked to economic performance such as GDP or exports. - Support for the use of IMF gold sales windfall profits to finance the PRGT going forward. 47 The summary of the teleconference and the comments received by CSOs are posted at: http://www.imf.org/external/np/spr/2012/comm/pdf/liccomments.pdf. ### Consultations with IMF Mission Chiefs - Survey and focus groups: - During March 2012, current and previous mission chiefs of PRGT-eligible countries provided feedback through a survey. - The overall participation rate was very good, with 60 mission chiefs responding. - The survey was followed by three focus group meetings with mission chiefs on: PRS requirements, PSI issues, and precautionary-type instrument. - Key findings and views: - The vast majority of mission chiefs thought that the LIC facilities have overall worked well and provided effective assistance to mitigate the impact of the global crisis. - Positive changes highlighted from the 2009 reforms: - Newly created facilities (the RCF and SCF). - Higher access. - Better financing terms (temporary interest waiver). - Increased flexibility on some operational modalities. - Critical observations: - A few mission chiefs noted that the 2009 reform brought only minor changes in some areas, in particular for the ECF relative to the PRGF. - A couple of mission chiefs had difficulties finding an appropriate instrument for their countries’ needs, due to perceived gaps or qualification criteria. - The usefulness of a precautionary financing facility was flagged. - Some survey responses noted that country authorities perceived access levels as being too low. - A large majority of mission chiefs felt that program modalities are mostly appropriate, but some raised concerns about: - Procedural rigidities of the PRS documentation requirements, which have in some cases delayed reviews and do not adequately focus on the substantive linkages between IMF-supported programs and poverty reduction strategies. - The revised debt limits policy remains rather rigid. - A few mission chiefs raised concerns about onerous Board documentation requirements, while seeing merit in further streamlining conditionality. *Source: Appendix V. Consultative Process* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2012/_072612.pdf_