## _082714 ## Source details **Canonical URL:** [_082714](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_082714.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_082714.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_082714.pdf.json) --- ### Facilities architecture overview - Fund concessional facilities aim to provide flexible, tailored support to low-income countries (LICs) to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Key milestones: - July 2009: Executive Board adopted comprehensive overhaul of concessional facilities. - January 7, 2010: Poverty Reduction and Growth Trust (PRGT) became effective. - September 28, 2012: Board adopted three-pillar strategy for PRGT sustainability: - (i) a base envelope of about SDR 1¼ billion in annual lending capacity; - (ii) contingent measures if average financing needs substantially exceed the base envelope for an extended period; - (iii) principle of self-sustainability. - April 8, 2013: Board concluded Review of Facilities for Low-Income Countries and approved improvements in tailoring and flexibility. - As of the review, 73 IMF member countries are PRGT-eligible. - Major instruments: - Extended Credit Facility (ECF): medium-term support for protracted BoP problems. - Standby Credit Facility (SCF): financing for short-term BoP needs. - Rapid Credit Facility (RCF): rapid low-access financing with limited conditionality for urgent needs. - Policy Support Instrument (PSI): nonfinancial policy support; can facilitate access under SCF and RCF. ### Choosing the appropriate facility — rules, definitions, and rules of thumb - Choice depends on: - (i) Duration of adjustment and BoP needs; - (ii) Conditionality standard (UCT-quality); - (iii) Nature of the BoP need (present, prospective, potential; and urgency). - Timing definitions: - Protracted balance of payments problem: resolution normally three years or more, and in any case more than two years. - Short-term balance of payments need: resolution normally two years or less, and in any case less than three years. - Borderline cases (more than two but less than three years) require judgment. - Rules of thumb: - Protracted BoP problem → ECF (UCT required). - Short-term present BoP need and UCT-quality feasible → SCF. - Urgent short-term need without UCT-quality → RCF. - Build track record via SMP or RCF if UCT-quality not immediately feasible. - Precautionary SCF possible for prospective/potential needs; PSI for broadly stable countries. ### Blending of PRGT and GRA resources — presumptions and operational rules - Presumption: Some PRGT-eligible countries are expected to receive blended PRGT and GRA resources rather than fully concessional financing. - Blending presumptions: - Blending presumed if either: - (i) per capita income above 100 percent of prevailing IDA operational cutoff; or - (ii) sustained past and prospective market access and per capita income exceeds 80 percent of IDA operational cutoff. - Blending should normally not be used for countries at high risk of debt distress or in debt distress per the most recent joint Bank-Fund LIC DSA. - Exceptional circumstances: blending can be used irrespective of income, market access, and debt sustainability criteria when financing needs exceed applicable access limits. - Mix and caps: - 50:50 mix of PRGT and GRA resources is the standard rule for blended financing; concessional resources capped at the norm applicable to unblended arrangements. - All access above the norm met from the GRA. - For RCF (no norm) concessional cap is the annual limit; for precautionary SCF cap is average annual access limit. - Norms and limits do not apply if outstanding concessional credit is above 200 percent of quota; access is then guided by cumulative access limit of 300 percent of quota (450 percent in exceptional cases), expectation of future Fund support needs, and repayment schedule. - Numeric operational notes: - As of July 2014, the IDA operational cutoff was US$1,215. - Past market access presumed if tapped international financial markets in at least two of the last five years with total access over five years ≥ 50 percent of quota. ### Blending access matrix (selected highlights from Table 2) - ECF (three-year reference): - Outstanding PRGT access below 100 percent of quota: - 0 < Access ≤ 240: 50:50 split between PRGT and GRA. - 240 < Access: 120 percent of quota from PRGT, rest from GRA. - Outstanding PRGT access above 100 percent of quota: - 0 < Access ≤ 150: 50:50 split. - 150 < Access: 75 percent of quota from PRGT, rest from GRA. - SCF (18-month reference): - Same numeric splits and thresholds as ECF for outstanding PRGT access bands. - For SCF treated as precautionary: - 0 < Access ≤ 100: 50:50 split. - 100 < Access: 50 percent of quota from PRGT, rest from GRA. - RCF disbursements (annual access): - 0 < Access ≤ 50: 50:50 split. - Access > 50: 25 percent of quota from PRGT, rest from GRA. - RCF shocks-window: - 0 < Access ≤100: 50:50 split. ### Extended Credit Facility (ECF) — objectives, qualification, and operational modalities - Purpose: - Medium- and longer-term concessional financing for PRGT-eligible members with protracted BoP problems to make significant progress toward a stable and sustainable macroeconomic position consistent with poverty reduction and growth. - Eligibility and qualification: - Protracted BoP problem when resolution expected to extend over normally three years or more. - Qualification requires Board finding of commitment and capacity to implement UCT-quality program enabling repayment within specified maturity. - Evidence includes recent policy performance, institutional capacity, and other circumstances. - Countries not qualifying can build track record via SMP or use RCF for urgent needs. - Duration and phasing: - Initial term: three to four years (normally three years); extendable up to five years total. - Minimum length for an ECF arrangement is three years. - Repeated successor ECF arrangements allowed if qualification criteria met; no limit on number of successors. - Access norms and limits: - Norm: 120 percent of quota per three-year ECF arrangement for countries with outstanding concessional credit < 100 percent of quota. - Norm: 75 percent of quota per three-year arrangement for countries with outstanding concessional credit between 100 percent and 200 percent of quota. - For outstanding concessional credit above 200 percent of quota, norms do not apply; guided by cumulative access limit of 300 percent of quota (450 percent in exceptional cases). - Special case: members with protracted BoP problems but minimal present/prospective needs → standardized access of 10 percent of quota per arrangement. - Rephasing, augmentations, and extensions: - Extensions involving rephasing/augmentations normally approved by Board in context of a program review (or exceptionally outside a review with documented policy understandings). - Short-term technical extensions for a few weeks/months possible to complete final review(s). - Extensions not possible if all scheduled amounts already disbursed. - Concurrent use and restrictions: - ECF cannot be used concurrently with SCF or PSI; pre-existing SCF or PSI must be cancelled before ECF approval and vice versa. - Member cannot obtain RCF financing (or start SMP) if an ECF arrangement is in place and on track, except under specific circumstances (urgent exogenous shock, ECF disbursements not possible, qualification met). - Financing terms: - Repayments: 10 equal semi-annual installments, subject to a 5.5-year grace period and 10-year final maturity. - Interest: currently set at zero percent; subject to biennial Board reviews within a 0.0–0.5 percent range for ECF. The next such review was scheduled for December 2014. - Financing assurances and arrears: - ECF arrangements and reviews can only be approved/completed when the program is fully financed; staff must confirm no unfilled financing gaps over the 12 months following approval/review. - Non-toleration of sovereign arrears to official creditors; remedial measures for PRGT arrears include removal from PRGT-eligibility list, declaration of noncooperation, suspension of technical assistance. - LIA policy applies to arrears to private external creditors; Fund can lend in arrears cases under specified conditions. - Program design and objectives: - Programs aimed at making significant progress toward stable and sustainable macroeconomic position; typical objectives include sustainable fiscal and current account balances, limited debt vulnerabilities, adequate reserves, low/moderate inflation, and sufficient institutional capacity. - PRS alignment: LOI/MEFP must include statement of how program advances poverty reduction and growth objectives; PRS document required by second review. ### Standby Credit Facility (SCF) — highlights of rules, access, and modalities - Duration and suitability: - Time needed to achieve stable macro position ≤ 2 years (in any case < 3 years). - SCF duration: 1–2 years; episodic use norm is no more than 2.5 out of every 5 years (excluding precautionary use). - UCT conditionality: required. - Access norms: - Norm: 120 percent of quota per 18-month arrangement for countries with outstanding concessional credit < 100 percent of quota. - Norm: 75 percent of quota per arrangement for countries with outstanding concessional credit between 100 percent and 200 percent of quota. - For duration ≠ 18 months, norm adjusted proportionally. - For outstanding concessional credit above 200 percent of quota, norms do not apply; guided by cumulative limit of 300 percent (450 percent exceptional). - Precautionary SCF sub-ceilings: - Annual limit 75 percent of quota; average annual limit (over arrangement) 50 percent of quota. - Concurrent use: - SCF cannot be used concurrently with ECF; member cannot obtain RCF financing (or start SMP) if SCF in place and on track, except in limited circumstances. - SCF can be used concurrently with a PSI without cancelling PSI; SCF qualification is presumed for on-track PSI users experiencing BoP needs. - Financing terms: - Repayments: nine equal semiannual installments, subject to a four-year grace period and eight-year final maturity. - Interest: currently set at 0.25 percent; for Jan 7, 2010 through Dec 31, 2014 no interest charged on outstanding balances of SCF credit. - Interest review range: 0.25–0.75 percent; next review scheduled for December 2014. - Availability fee: 0.15 percent per annum on undrawn portion each six-month period. - Safeguards, arrears, and program design: - Financing assurances required; staff must confirm no unfilled financing gaps over next 12 months. - Safeguards assessment aimed to be completed prior to Board approval; report completed by first review. - Programs aligned with poverty reduction objectives; PRS linkage and DSA requirements similar to ECF. ### Rapid Credit Facility (RCF) — objectives, repeated use, access, shocks window - Purpose: - Rapid concessional outright disbursements for urgent BoP needs caused by exogenous shocks, natural disasters, conflict emergence, domestic instability, emergencies, and fragility. - Designed where UCT-quality multi-year program is not necessary or not feasible. - Qualification: - Urgent BoP need is a present need that, if not addressed, would result in immediate and severe economic disruption. - RCF used when UCT-quality program is not feasible/necessary, or need expected to be resolved within one year with no major policy adjustments. - Qualification requires ex ante policy undertakings, typically in an LOI (e.g., commitments not to introduce or intensify exchange and trade restrictions). - Repeated use limitations: - Member may not receive more than two RCF disbursements in any 12-month period. - Qualifications for repeated disbursements: no RCF disbursements in past three years; or primary cause was sudden exogenous shock; or established track record of adequate macroeconomic policies for about six months prior. - Access numeric sub-ceilings: - Standard RCF sub-ceilings: - 25 percent of quota per year; - 100 percent of quota cumulative. - Shocks window (augmented access if primary cause is sudden exogenous shock and policies strong): - Up to 50 percent of quota per year; - Up to 125 percent of quota cumulative. - No norms for RCF access; sub-ceilings are not norms. - Blending: - Blending presumed per PRGT rules; RCF resources normally provided with GRA resources under RFI when blended. - If no available GRA instrument exists for blending, RCF-only possible irrespective of blending presumption. - Financing terms: - Repayments: 10 equal semiannual installments; 5.5-year grace period; 10-year final maturity. - Interest: currently zero percent; subject to biennial reviews within 0.0–0.5 percent range. - Financing assurances and arrears: - Financing assurances not required for RCF disbursements but staff reports should provide projected financing gaps and discuss prospects for assurances if building to UCT-quality arrangement. - Arrears policy: non-toleration of sovereign arrears to official creditors applies; flexibility in some post-conflict/natural catastrophe cases. - Safeguards assessment required commitment and auditor access; timing case-by-case. ### Access determination, global limits, and exceptional access - Main criteria for access determination (applies to ECF, SCF, RCF): - (i) member’s present/prospective/potential BoP needs; - (ii) strength of program and capacity to repay the Fund; - (iii) amount of outstanding Fund credit and past use record. - Global PRGT limits: - Normal annual limit: total access under PRGT should normally not exceed 100 percent of quota per year across all concessional facilities. - Normal cumulative limit: total access should normally not exceed 300 percent of quota cumulatively, net of scheduled repayments. - Exceptional access criteria and hard caps: - Conditions for exceptional access: - (i) exceptionally large BoP need that cannot be met within normal limits; - (ii) comparatively strong adjustment program and ability to repay the Fund (generally not met for high risk of debt distress unless debt relief/restructuring projected); - (iii) country does not meet income or market access criteria for blending. - Hard caps for exceptional access: - 150 percent of quota annually; - 450 percent of quota cumulatively across all concessional facilities. - Procedural safeguards on high access requests: - A DSA or DSA update required if: - (i) financing request involves exceptional access; or - (ii) brings total access under concessional facilities to more than 80 percent of quota over any 24-month period; or - (iii) involves a member with high risk of debt distress or in debt distress. - Early informal Board meeting required if request involves exceptional access or brings total concessional access to more than 180 percent of quota over any 36-month period. - New financing requests of 10 percent or less of quota do not trigger DSA update or Board briefing. ### Conditionality, specification of conditions, waivers, and misreporting - Conditionality principles: - Conditions normally macroeconomic variables and structural measures within member’s control, and either critical for program goals/monitoring or necessary for IMF Articles implementation. - ECF, SCF, and PSI must meet UCT conditionality standard (commitment and capacity to implement policies adequate to correct external imbalances and enable repayment). - RCF does not require UCT-quality program; no ex post conditionality or formal reviews—supports ex ante policy undertakings. - Specification: - Conditionality components: quantitative periodic and continuous PCs (or ACs for PSI), structural benchmarks, and prior actions if necessary. - Quantitative PCs normally semi-annual; indicative targets normally quarterly. - Continuous PCs include commitments on exchange restrictions, multiple currency practices, and non-accumulation of external payments arrears. - Structural benchmarks used parsimoniously; structural PCs discontinued in 2009. - Waivers and modifications: - Waivers for non-observance may be granted for minor/temporary deviations or remedial actions; waivers required for quantitative PCs tied to the specific disbursement and review. - Waivers of applicability are unusual under ECF and SCF; not generally possible under PSI. - Modifications to Board-set conditionality must be approved by Board before the relevant test date, normally in a program review. - Misreporting: - Misreporting defined as obtaining resources based on inaccurate information regarding observance of PCs/prior actions (a “noncomplying disbursement”). - Procedures: Managing Director informs member; after consultation, MD may submit report and recommendations to Executive Board; Board may require repayment or waive nonobservance. - De minimis misreporting: waiver granted and not published. ### Reviews, disbursements, test dates, and blackout-period policy - Reviews purpose: - Assess backward-looking performance against PCs/benchmarks/prior actions and forward-looking prospects for successful implementation; update program design. - At approval and each review, LOI presents/updates policy program; staff report provides overall assessment. - Timing and sequencing: - For standard three-year ECF: reviews and disbursements normally semi-annual → typically seven scheduled disbursements and six reviews. - For SCF: disbursements and reviews normally semiannual, or quarterly where closer monitoring needed. - Test dates must be set so all scheduled disbursements occur before end of arrangement, accounting for reporting lags and staff report circulation. - Availability dates set so data needed to confirm observance would have become available. - Reviews cannot be completed before applicable availability date. - Blackout-period policy: - ECF and SCF designs avoid blackout periods because each disbursement linked to completion of specific review and observance of specific periodic PCs. - Interruptions and remedies: - Interruptions due to slippages often addressed by establishing a track record (informal, SMP, or RCF), extensions, combining reviews, or rephasing of access. - Combining two reviews possible under conditions; combining three or more reviews very unusual. - Rephasing must not make it impossible for member to obtain full undisbursed amount. ### Debt Sustainability Analysis (DSA), PRS linkages, and collaboration with development partners - DSA requirements: - ECF-, SCF-, RCF-, and PSI-supported programs should be underpinned by thorough DSAs to inform medium-term debt strategies and fiscal frameworks. - Joint DSAs with World Bank required for PRGT-eligible countries with access to IDA resources; full DSA required at least once every three years with annual updates possible. - DSA includes 20-year forward-looking projections, risk assessment (low/moderate/high/in debt distress), and borrowing strategy recommendations. - DSA/DSA updates required for high access requests or when cumulative access exceeds specified thresholds triggering procedural safeguards. - Poverty Reduction Strategy (PRS) linkages: - Financing requests and program reviews under ECF, SCF, RCF must be accompanied by statement (normally in LOI/MEFP) of how program advances poverty reduction and growth objectives. - For ECF and PSI, second and subsequent reviews require PRS document issued to Board within previous 18 months (or equivalent documentation as specified). - Social and priority spending should be safeguarded and monitored through indicative floors when feasible. - Collaboration: - Fund staff should consult closely with major development partners; JMAP calls for Bank and Fund country teams to consult at least once a year to coordinate priorities and work plans. ### Documentation, mission, and procedural guidance (selected operational points) - LOI/MEFP requirements: - LOI sets out policies and measures; MEFP typically accompanies LOI for new financing/requests and reviews. - LOI/MEFP usually contains a quantitative PC table covering next 12 months and structural benchmark table for next 12 months. - New program requests require a TMU that defines PCs, adjustors, coverage, exchange rate valuation, and data requirements. - Mission and post-mission work: - Policy Note (PN) prepared pre-mission; final PN sent to management for clearance. - Back-to-Office Report (BTO) due within two working days of mission return. - Staff report required for Article IV, initial program requests, and each program review; should include full set of macro tables, financing, and DSA main conclusions. - Management clearance memo and timeline steps described for typical mission-to-Board circulation (selected timings provided). - SMPs and track records: - SMPs are informal monitoring arrangements to build track record toward UCT-quality programs; not Board-endorsed and not require UCT conditionality. - Track record periods typically minimum six months, often two test dates, normally not exceeding 18 months. - RCF can be used to build track records for repeated disbursements subject to limits. - EPAs, PPM, and Article IV cycles: - Ex Post Assessments (EPAs) required for members with long-term program engagement (LTPE) as defined. - Post-Program Monitoring (PPM) expected when outstanding Fund credit exceeds 200 percent of quota after expiry. - Article IV cycle: 24-month cycle applies for members with ECF, SCF, or PSI arrangements (with specified exceptions and adjustments). ### PRGT eligibility and Appendix VI highlights - PRGT eligibility reviewed every two years; entry/graduation criteria based on per capita GNI relative to IDA operational cutoff and capacity to access international financial markets on a durable and substantial basis. - For FY2015 reference: IDA operational cutoff noted as US$1,215 (based on 2013 data). - Graduation rules include income and market-access tests and absence of serious short-term vulnerabilities; special rules for small countries and microstates. - Appendix Table 4 (selected entries; per capita GNI and population): - Afghanistan — 700 — 30.6 - Bangladesh — 900 — 156.6 - Benin — 790 — 10.3 - Bhutan — 2,430 — 0.7 - Bolivia — 2,550 — 11.0 - Burkina Faso — 670 — 16.9 - Burundi — 280 — 9.0 - Cambodia — 950 — 15.1 - Cameroon — 1,270 — 22.0 - Cape Verde** — 3,630 — 0.5 - ... (table continues with country-specific per capita GNI and population as listed in Appendix Table 4). - Memorandum item: - Zimbabwe — 820 — 13.1 *Source: INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW and selected chapters/excerpts from IMF document _082714 (2014 Handbook of IMF Facilities for LICs).* ### INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW _____________________________________ 5 ### INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW ### A. Background - The Fund’s concessional facilities are aimed at providing flexible and tailored support to low-income countries (LICs) to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - In July 2009, the Fund’s Executive Board adopted a comprehensive overhaul of the Fund’s concessional facilities. - The Poverty Reduction and Growth Trust (PRGT) became effective on January 7, 2010 to finance concessional loans. - On April 8, 2013 the Fund’s Executive Board concluded the Review of Facilities for Low-Income Countries and approved staff’s proposals to improve tailoring and flexibility. - The Board adopted on September 28, 2012 a three-pillar strategy to make the PRGT sustainable, consisting of: - (i) a base envelope of about SDR 1¼ billion in annual lending capacity; - (ii) contingent measures that can be put in place if average financing needs substantially exceed the base envelope by a substantial margin for an extended period; and - (iii) a principle of self-sustainability to ensure that demand can be met with the available resources under a plausible range of scenarios. - As of the review, 73 IMF member countries are PRGT-eligible. ### Major instruments in the LIC facilities architecture - Extended Credit Facility (ECF): succeeds the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term support to LICs with protracted balance of payments problems. - Standby Credit Facility (SCF): provides financing to LICs with short-term balance of payments needs, similar to the Stand-By Arrangement (SBA). - Rapid Credit Facility (RCF): provides rapid low-access financing with limited conditionality to meet urgent balance of payments needs. - Policy Support Instrument (PSI): nonfinancial policy support tool for LICs; can facilitate access under the SCF and RCF, if needed. - Note: In some cases Staff-Monitored Programs (SMPs) or blending PRGT with GRA facilities may be appropriate. ### B. Choosing the Appropriate Facility — Key principles - Choice depends on three main factors: - (i) Duration of adjustment and balance of payments (BoP) needs (time needed to establish a stable and sustainable macroeconomic position); - (ii) Conditionality standard (whether it meets the upper credit tranche (UCT) quality); - (iii) Nature of the balance of payments need (present, prospective, or potential; and whether urgent). - Definitions and timing: - Protracted balance of payments problem: resolution normally three years or more, and in any case more than two years. - Short-term balance of payments need: resolution normally two years or less, and in any case less than three years. - Borderline cases (more than two but less than three years) require judgment, considering structural reform, capacity needs, and frequency of financing needs. - Conditionality standard: - UCT-quality implies authorities have commitment and capacity to implement policies adequate to correct external imbalances and enable repayment within the specified maturity period. - Nature of BoP need: - Present: exists in the current period; can be urgent if failure to address causes immediate severe disruption. - Prospective: expected/projected to arise in the future, including during program implementation. - Potential: may arise under an alternative (typically downside) scenario but not expected under baseline projections. ### B. Choosing the Appropriate Facility — Rules of thumb - If a country faces a protracted BoP problem: - Support under the ECF; not under the SCF or PSI. - ECF appropriate for supporting a UCT-quality program. - If not in position to implement UCT-quality program, build track record via SMP or access RCF if urgent financing needs exist. - If a country does not have a protracted BoP problem but faces short-term (present) BoP needs: - Support under the SCF if a UCT-quality program can be implemented. - RCF alternative when a UCT-quality program is not necessary and the need is urgent (e.g., transitory shock, expected resolution within one year, no major policy adjustments needed). - If not in position to implement UCT-quality program, build track record via SMP or access RCF if urgent needs exist. - Countries with neither protracted nor present BoP needs but with prospective or potential needs: - SCF could be used on a precautionary basis; actual disbursements possible if a present BoP need arises. - Countries already broadly stable and sustainable: - Could be supported under the PSI. - If short-term BoP needs arise during a PSI, country can request SCF financing or RCF if urgent. - Precautionary SCF support possible in conjunction with the PSI in periods of increased uncertainty or risk. ### Table summary: Choice of Low-Income Country—Key Factors (selected highlights) - Extended Credit Facility (ECF) - Duration of adjustment and BoP needs: Protracted BoP problem. Time needed to achieve stable and sustainable macro position ≥ 3 years (in any case > 2 years). - UCT conditionality standard: Required. - Size and nature of BoP need: Present or prospective BoP needs exist (even if minimal) over course of 3-year arrangement, but a present need is not necessary for each disbursement. - Access: Norm is 120% of quota (or 75% if outstanding PRGT credit >= 100% of quota). Annual/cumulative limit: 100/300% of quota. - Duration: 3 to 4-year duration, extendable to 5 years. PRS document required by 2nd review. - Standby Credit Facility (SCF) - Duration: Time needed to achieve stable and sustainable macro position ≤ 2 years (in any case < 3 years). - UCT conditionality standard: Required. - Size and nature of BoP need: SCF can be approved based on present, prospective, or potential short-term BoP needs. Precautionary use possible. Disbursements require a present need. - Access: Norm is 120% of quota (or 75% if outstanding PRGT credit >= 100% of quota) for 18-month arrangement. Annual/cumulative limit: 100/300% of quota. Precautionary use: annual limit 75% of quota, and average annual limit (over arrangement) 50% of quota. - Duration: 1-2-year duration. Episodic use the norm; i.e., no more than 2.5 out of every 5 years (excl. precautionary use). - Rapid Credit Facility (RCF) - Duration: Could be short term or protracted. - UCT conditionality standard: UCT conditionality not needed or not feasible. No ex-post conditionality or reviews. Can help build track record. - Size and nature of BoP need: Urgent (present) BoP need must exist. Prospective or potential needs may also exist. - Access: No norm. Annual/cumulative limit: 25/100% of quota, or 50/125% in case of sudden exogenous shocks. - Duration: One-off disbursements. Repeated use possible based on sudden exogenous shocks or 6-monthly track records. - Policy Support Instrument (PSI) - Duration: Broadly stable and sustainable macroeconomic position. - UCT conditionality standard: Required. - Size and nature of BoP need: At time of approval, BoP needs may exist but would be expected to be met through financing from non-Fund sources. - Access: No access. On-track PSI facilitates rapid approval of SCF or RCF, without need to cancel PSI. - Duration: 1-4 year duration, extendable to 5 years. PRS document required by 2nd review. - Staff-Monitored Program (SMP) - Purpose: Build a track record toward a UCT-quality program. - UCT conditionality standard: Not required. - Access: No access. - Duration: Normally 6-18 months. No Board endorsement. - Blending note (from table footnote): - For PRGT-eligible countries meeting the blending criteria, any concessional financial support should be blended with GRA financing, normally resulting in ECF-EFF, SCF-SBA, and RCF-RFI blends. - Access and limits footnotes: - Norms and limits do not apply if outstanding concessional credit is above 200 percent of quota. In such cases, access is guided by consideration of the cumulative access limit of 300 percent of quota (450 percent of quota in exceptional cases), the expectation of future need for Fund support, and the repayment schedule. - Exogenous shock definition (footnote): - An exogenous shock is defined as an event beyond the control of the authorities of the member, with a significant negative impact on the economy (examples include terms-of-trade shocks, natural disasters, shocks to demand for exports, or conflict or crisis in neighboring countries that has adverse BoP effects). ### C. Blending - (Blending section title present; detailed text not included in the supplied extract.) *Source: INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW (2014 Handbook of IMF Facilities for LICs) — provided content excerpt.* ### 6. There is a presumption that some PRGT-eligible countries are expected to receive financial ### _082714 - 6. There is a presumption that some PRGT-eligible countries are expected to receive financial ### Presumption on use of blended PRGT and GRA resources - PRGT-eligible countries are expected to receive financial assistance through blended PRGT and GRA resources, rather than relying on fully concessional Fund financing. - Total access under blended PRGT and GRA arrangements is determined based on the standard criteria: - (i) the member’s balance of payments need; - (ii) the strength of its program and capacity to repay the Fund; and - (iii) the amount of outstanding Fund credit and the member’s record of past use. - Blending can provide a signal that the borrower is moving toward middle-income or emerging market status. - PRGT-eligible countries are expected to use either fully concessional or blended resources, rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources. ### Presumptions and limitations on blending - Blending is presumed for PRGT-eligible countries with either: - (i) per capita income above 100 percent of the prevailing operational cutoff used by IDA, or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. - Other PRGT-eligible countries are expected to use concessional financing only. - Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)), even if per capita income or market access creates a presumption for blending. - In exceptional circumstances, when financing needs exceed the applicable access limits, blending can be used irrespective of the per capita income, market access, and debt sustainability criteria. ### Operational rules: mix, caps, and when norms do not apply - The blending rules stipulate a 50:50 mix of PRGT and GRA resources, with access to concessional resources capped at the norm (or equivalent) applicable to unblended arrangements. - All access above the norm needs to be met from the GRA. - For RCFs, which have no norm, the cap on access to concessional resources is the annual limit. - For SCF arrangements treated as precautionary, the cap on concessional resources is the average annual access limit. - Norms and limits do not apply if outstanding concessional credit is above 200 percent of quota; in such cases, access is guided by: - consideration of the cumulative access limit of 300 percent of quota (450 percent of quota in exceptional cases), - the expectation of future need for Fund support, and - the repayment schedule. ### Table 2 — Rules for Blending of PRGT and GRA Resources (access in percent of quota) - General note: Refers to total access provided under the blended financing package. - ECF Arrangements (three-year reference; norms vary with outstanding PRGT access): - Outstanding PRGT access below 100 percent of quota: - 0 < Access ≤ 240: 50: 50 split between PRGT and GRA - 240 < Access: 120 percent of quota from the PRGT, and the rest from the GRA - Outstanding PRGT access above 100 percent of quota: - 0 < Access ≤ 150: 50: 50 split between PRGT and GRA - 150 < Access: 75 percent of quota from the PRGT, and the rest from the GRA - Note: For a four-year ECF arrangement, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. For countries whose outstanding PRGT access is above 200 percent of quota, the norms do not apply. - SCF Arrangements (18-month reference; norms vary with outstanding PRGT access): - Outstanding PRGT access below 100 percent of quota: - 0 < Access ≤ 240: 50: 50 split between PRGT and GRA - 240 < Access: 120 percent of quota from the PRGT, and the rest from the GRA - Outstanding PRGT access above 100 percent of quota: - 0 < Access ≤ 150: 50: 50 split between PRGT and GRA - 150 < Access: 75 percent of quota from the PRGT, and the rest from the GRA - Note: For SCF arrangements with a duration of more than 18 months, the norm is increased proportionally, and for arrangements with a duration of less than 18 months, the norm is decreased proportionally. For countries whose outstanding PRGT access is above 200 percent of quota, the norms do not apply. - SCF Arrangements treated as precautionary: - 0 < Access ≤ 100: 50: 50 split between PRGT and GRA - 100 < Access: 50 percent of quota from the PRGT, and the rest from the GRA - Note: Refers to average annual access under an SCF arrangement where there is a potential but no present or prospective balance of payments need. - RCF Disbursements (annual access): - 0 < Access ≤ 50: 50: 50 split between PRGT and GRA - Access > 50: 25 percent of quota from the PRGT, and the rest from the GRA - Note: Rapid Financing instrument (GRA counterpart of RCF) has an annual access limit of 50 percent of quota and a cumulative access cap of 100 percent of quota. - RCF Disbursements under the shock-window: - 0 < Access ≤100: 50: 50 split between PRGT and GRA ### Extended Credit Facility (ECF) — objectives and qualification - Purpose and objective: - The ECF provides medium- and longer-term concessional financing to LICs with protracted balance of payments problems. - The purpose of an ECF arrangement is to assist PRGT-eligible member countries with a protracted balance of payments problem in implementing economic programs aimed at making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Such a position would typically be associated with sustainable fiscal and current account balances, limited debt vulnerabilities, adequate international reserves, and sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Use of the ECF is appropriate where the resolution of entrenched macroeconomic imbalances is expected to extend over the medium or longer term, and repeated use has been common. - Role of ECF resources: - Provide temporary concessional financial support to smooth economic adjustment and avoid excess volatility. - Strengthen the country’s international reserve position and loosen financing constraints for public and private sectors within a policy framework aimed at stability. - Expected to catalyze additional financing from donors. - Eligibility and qualification: - Assistance under the ECF is available to all PRGT-eligible member countries that face a protracted balance of payments problem. - A protracted balance of payments problem exists when the resolution of macroeconomic imbalances needed to establish a stable and sustainable macroeconomic position is expected to extend over normally three years or more. - If a stable and sustainable macroeconomic position is expected within two years or less and the member has a short-term balance of payments need, the SCF would be appropriate instead. - For cases where the expected resolution is more than two but less than three years, choice between ECF and SCF is on a case-by-case basis; the minimum length for an ECF arrangement is three years and SCF use is normally limited to two and a half years out of any five-year period (except precautionary SCF). - Qualification requires a Board finding that the member is making an effort to strengthen substantially and sustainably the country’s balance of payments position, with a UCT-quality policy program and capacity and commitment to implement policies adequate to correct external imbalances and enable repayment to the Fund within the specified maturity period. - Evidence of capacity and commitment includes recent policy performance (including under a recent Fund-supported program), institutional capacity, and other circumstances affecting macroeconomic performance. - Alternatives for building track record: - Countries not currently able to meet ECF qualification requirements can build a track record toward an ECF via an SMP or, in case of urgent financing needs, the RCF (assuming applicable policy commitments are in place). ### ECF duration, extensions, cancellations, and repeated use - Initial term and extensions: - Assistance under an ECF arrangement is available for an initial term of three to four years, from the date of the Board decision approving the arrangement. - Normally, ECF arrangements would be expected to be approved for an initial three-year term. - An initial duration of up to four years could be considered to align with PRSP cycles or when blending with EFF arrangements. - An ECF arrangement may be extended (including multiple times), subject to an overall five-year limit on the total duration of any ECF arrangement. - After expiration or cancellation, additional ECF arrangements may be approved if qualification criteria are met. There is no limit on the number of successor ECF arrangements that can be approved. - Rephasing and augmentations: - ECF arrangements can be extended at the request of the member to allow for the disbursement of rephased amounts or to provide augmentations in light of projected balance of payments developments, subject to appropriate conditions. - Reasons for rephasing or augmentations include: - (i) more time is needed to implement envisaged policies or reforms; - (ii) a shock has led to additional financing and adjustment needs; - (iii) more time is needed to design a successor ECF-supported program; or - (iv) the protracted balance of payments problem is expected to be resolved within the remaining maximum period of the ECF arrangement. - Extensions may involve establishment of additional reviews and can be combined with augmentations if warranted. - Conditions on extensions: - Extensions must be requested by the member and approved by the Board before the expiration of the arrangement period. - Extensions are only possible if needed to allow for the disbursement of amounts under the arrangement; it is not possible to extend arrangements when all scheduled amounts have already been disbursed. - Extensions are not automatic and are subject to appropriate conditions consistent with the terms of assistance under the ECF. *Excerpt from IMF document _082714 (content unit provided).* ### 18. Extensions that involve rephasing and/or augmentations of access would normally be ### 18. Extensions that involve rephasing and/or augmentations of access would normally be ### Extensions: approvals, short-term extensions, cancellations, automatic termination - Extensions involving rephasing and/or augmentations of access - Normally approved by the Board on the basis of a request in an LOI and in the context of a program review (where the completion of the review demonstrates that the program is on track). - In exceptional circumstances (e.g., when a severe natural disaster prevents conducting the final review in a timely manner), extensions that involve rephasing may be approved by the Board outside the context of a scheduled program review, provided: - the authorities and staff have understandings on appropriate policies to be implemented through the next review, as documented by a letter from the authorities; - Board approval would require a staff report that discusses the reasons for the extension, including why it is proposed outside the review context, the status of the program, and relevant policy understandings. - Short-term (technical) extensions where no rephasing or access change is involved - ECF arrangements can be extended for a short period (a few weeks or months) if additional time is needed to complete final review(s) and make the final disbursement available before the expiration of the arrangement. - Such short-term extensions can be granted outside the context of a review, provided the authorities and staff have reached (or are expected to reach in the very near term) understandings on appropriate policies to complete the review. - Board approval generally takes place in the context of a very short staff paper with a decision proposed for lapse-of-time Board approval; the staff paper should explain the status of discussions and document preparation and any relevant policy understandings. - Cancellation and automatic termination - ECF arrangements may be cancelled by the authorities at any time (e.g., when macroeconomic imbalances have been resolved; lack of capacity or commitment to implement the program; or substantial change in authorities’ policy objectives/modalities). - ECF arrangements approved after November 11, 2013 will automatically terminate before their terms at approval if no program review has been completed over an 18-month period. - The Board may, at the authorities’ request, delay the termination for up to three additional months—provided that this extension does not fall outside the existing period of the arrangement—if an understanding between the authorities and staff on targets and measures to put the ECF-supported program back on track appears imminent. - The arrangement automatically expires at the end of that extended period unless a program review is completed within this period. - Arrangements automatically expire once all available amounts have been disbursed. ### Concurrent use and blending: permissible mixes and limits - Concurrent use - The ECF cannot be used concurrently with the SCF or PSI; any pre-existing SCF arrangement or PSI must be cancelled before an ECF arrangement can be approved, and vice versa. - A member cannot obtain RCF financing (or start an SMP) if an ECF arrangement is in place and on track. - If additional balance of payments needs arise during an ECF arrangement, an augmentation of access under the ECF arrangement would typically be the appropriate response. - RCF financing during an ECF arrangement can only be provided when: - (i) ECF disbursements are not possible (e.g., due to policy slippages or delays in program discussions); - (ii) qualification requirements for the RCF are met, including the existence of an urgent balance of payments need and relevant policy commitments; and - (iii) the balance of payments need is primarily caused by a sudden exogenous shock. - When access under the RCF exceeds 25 percent of quota in these circumstances, policies should be appropriate to address the shock. - RCF-supported policies could serve as a track record to bring the ECF-supported program back on track; in the absence of an urgent financing need, a track record could be built through an SMP. - The ECF can be used concurrently with GRA financing under certain circumstances. - Blending (PRGT + GRA) - Certain PRGT-eligible countries are expected to receive financial assistance through blended PRGT and GRA resources, rather than relying on fully concessional Fund financing. - When financing is blended under a PRGT arrangement and an arrangement under the GRA, total access is determined based on the standard criteria, implying total access should be comparable across country cases with similar balance of payments needs, program strengths, and outstanding Fund credit, irrespective of whether the Fund’s assistance is blended or PRGT-only. - PRGT-eligible countries, including members qualifying for an ECF arrangement, would be expected to use either fully concessional or blended resources, rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources. - Blending presumptions and limitations: - Blending is presumed for PRGT-eligible countries with either (i) per capita income above the prevailing operational cutoff used by IDA or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. - Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the 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 the per capita income, market access, and debt sustainability criteria. - Practical points on blended financing: - When providing blended resources, ECF resources will normally be provided together with GRA resources under the Extended Fund Facility (EFF). - Concurrent financial assistance under an ECF arrangement and an SBA would only be expected where pre-existing ECF support is supplemented by SBA financing later (e.g., ECF blended with EFF and extended beyond four years, since EFF arrangements are limited to a four-year period). - RFI financing under the GRA during an ECF arrangement would be expected only if the ECF-supported program is off track; RFI purchases would typically be combined with RCF disbursements in that case. - Modalities of blended assistance broadly mirror a stand-alone ECF arrangement (three- to four-year program, single set of program conditions, schedule of disbursements and reviews), but differences include: - Disbursements would involve both ECF and EFF resources, implying lower average concessionality than under stand-alone ECF. - EFF qualification requirements must be met (e.g., clearly articulated structural reform agenda) and if the blend pushes access above GRA normal limits, Exceptional Access criteria would apply. - Reviews under the EFF may require waivers of applicability under certain circumstances. - ECF disbursements are linked to specific test dates, whereas extended-arrangement purchases are conditioned on observance of the Performance Criteria (PCs) related to the most recent test date—thus ECF component funds might be available while EFF component funds are not, unless waivers for non-observance are granted. - Operational specifics cited in the text: - As of July 2014, the IDA operational cutoff was US$1,215. It is revised each year, typically in July. - A member is presumed to have had past market access if it tapped international financial markets during at least two of the last five years, and with the total access over the five years amounting to a minimum of 50 percent of quota. ### Access: determination, norms, limits, phasing - Determination of access—main criteria - Access is determined case-by-case based on standard criteria: - (i) the member’s (present and prospective) balance of payments need (taking into account all projected balance of payments flows, including reserve accumulation and financing from other sources); - (ii) the strength of its program and capacity to repay the Fund (policy plans, adjustment effort, commitment to implement the program, institutional capacity, track record of policy implementation, country circumstances such as vulnerabilities, imbalances, and debt sustainability); and - (iii) the amount of outstanding Fund credit and the member’s record of past use. - Access may generally not exceed the member’s present and prospective balance of payments needs during the program period and would typically be less than total financing needs, noting that ECF-supported programs are expected to catalyze financing from donors. - Unlike GRA financing (and the SCF and RCF), an ECF arrangement can be approved and individual disbursements can be made even in the absence of a present balance of payments need, provided the Executive Board has found the member is experiencing a protracted balance of payments problem at the time of approval. - Access norms - The access norm is: - 120 percent of quota per three-year ECF arrangement for countries with total outstanding concessional IMF credit under all facilities of less than 100 percent of quota; and - 75 percent of quota per three-year arrangement for countries with outstanding concessional credit of between 100 percent of quota and 200 percent of quota. - For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. - For countries whose outstanding concessional credit is above 200 percent of quota, the norms do not apply; access is guided by consideration of the cumulative access limit of 300 percent of quota (450 percent of quota in exceptional cases), the expectation of future need for Fund support, and the repayment schedule. - Access norms provide general guidance and represent neither ceilings nor floors; access can deviate from the norms if warranted by standard criteria. - Special case: members with protracted balance of payments problems but minimal present or prospective needs - Practice has been to set access at a standardized level of 10 percent of quota per arrangement. - The low level of access is appropriate even when potential needs are substantial because the ECF arrangement can be quickly augmented if needs materialize. - In contrast to the SCF, precautionary use of the ECF is not envisaged; members have routinely drawn amounts as they become available under the ECF irrespective of present needs. - Access limits (global annual and cumulative limits across concessional facilities) - Total access under all concessional facilities is subject to global annual and cumulative limits, including credit outstanding and disbursements under the ECF, SCF, RCF, and Exogenous Shocks Facility (ESF). - Normal limits: - Total access to financing under the PRGT should normally not exceed 100 percent of quota per year across all concessional facilities. - The annual access limit refers to past and future scheduled disbursements in any 12-month period, specifically: - (i) any actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available (date of the Board decision that makes the disbursement available); - (ii) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not; and - (iii) any future disbursements under the ECF at the scheduled availability dates. - Total access to financing under the PRGT should normally not exceed 300 percent of quota cumulatively, net of scheduled repayments. - The cumulative access limit requires that total outstanding Fund concessional credit (including disbursements that were made available but not drawn in the context of the current arrangement) cannot normally exceed 300 percent of quota at any point in time based on projected disbursements and repayments. - Exceptional access above normal limits can be made available if all of the following are satisfied: - (i) the country experiences an exceptionally large balance of payments need that cannot be met within the normal limits (e.g., very large external shocks, very low levels of reserves); - (ii) the country has a comparatively strong adjustment program and ability to repay the Fund—this criterion would generally not be met for countries with a high risk of debt distress or those in debt distress as defined under the joint Bank-Fund DSA, unless expected debt relief or restructuring is projected to reduce the risk to a moderate level or low level; and - (iii) the country does not meet the income or market access criteria for blending. - Exceptional access is subject to hard caps of: - 150 percent of quota annually; and - 450 percent of quota on a cumulative basis, net of scheduled repayments, across all concessional facilities. - Phasing of access - The phasing of ECF access, determined at the time of approval, must take into account applicable annual access limits but need not mirror projected evolution of balance of payments needs. - Access should normally be phased smoothly over the three- to four-year period, but could be front-loaded or back-loaded if warranted by program strength and/or the time profile of balance of payments needs. - A significant degree of front-loading has been applied in exceptional cases involving repayment of emergency assistance to the Fund or arrangements approved following clearance of overdue obligations to the Fund as part of a broader arrears clearance strategy. *Source: EXTENDED CREDIT FACILITY — selected sections from the provided PDF content.* ### 36. It is standard practice for staff reports to present the balance of payments in a way that, in ### It is standard practice for staff reports to present the balance of payments in a way that, in ### Presentation and financing of the balance of payments - Staff practice: scheduled IMF disbursements, together with other exceptional financing items, do not exceed the overall balance of payments deficit (from “autonomous transactions”) and the programmed level of reserve accumulation in any given period. - Implication: the balance of payments would be fully financed, at least in the near term, at the time of ECF approval and completion of each review; residual financing gaps may show in the outer years. - Financing assurances are relevant to this presentation (see Section F on financing assurances). ### Access under blended financial assistance - General rule: when financing is blended under an ECF arrangement and an arrangement under the GRA, standard PRGT access norms do not apply; access under blended financial assistance is subject to specific rules. Total access is determined based on the standard criteria, implying comparable total access across similar country cases. - Key rules: - Access to the concessional (ECF) component of blended financial assistance is normally half of total access, with access to concessional resources capped at the norm applicable to unblended arrangements. All access above the norm is met by GRA financing. - At approval of a new ECF arrangement involving blended assistance, each scheduled disbursement should generally involve both ECF and GRA resources. For GRA resources phasing and PCs apply only to purchases above the first credit tranche. Shares of ECF and GRA financing at each disbursement can be determined individually and need not remain constant across disbursements. - Exceptional circumstances: access to concessional resources under blended assistance could reach the annual access limit of 100 percent of quota or possibly the exceptional annual access limit of 150 percent of quota if criteria for exceptional concessional access are met (including that the country does not meet the income or market access criteria for blending). ### Augmentations and reductions of access - Augmentation permitted to meet larger balance of payments need or support program strengthening; augmentation often appropriate in shocks unless program is off track (in which case RCF financing may be appropriate). - Extension of an ECF arrangement period often justifies augmentation if extension involves needs not originally included. - Under the Trade Integration Mechanism (TIM), augmented access not exceeding 10 percent of quota will be available to compensate balance of payments shortfalls from trade liberalization measures implemented by other countries. - Determination of augmentation size follows standard access criteria (balance of payments need and program strength). No formal norms, but many augmentations have been in the range of 15–45 percent of quota, with a few cases well above this range. - Procedural expectations for augmentation requests: - Staff reports should explicitly discuss basis and size of augmentation, referencing main criteria and access norms/limits. - Augmentations normally approved at the time of a scheduled review. - Ad hoc augmentations (when increase is acute and cannot await next scheduled review): - Board must assess that the program is on track at time of augmentation; otherwise RCF may be requested. - Considerations include observance of continuous performance criteria (PCs), whether a waiver is justified, prior actions, suitability of policies, exogenous developments, and data on periodic PCs. - Modalities for ad hoc augmentations: - Requests supported by a short staff report and an LOI describing nature/size of problem, policies, and implementation information. - Augmentations approved in ad hoc reviews are available in a single disbursement following Board approval; no limit on the amount of such a disbursement subject to overall access limits and norms. Disbursement limited to what is immediately needed. - New disbursement is subject to observance of continuous PCs and accuracy of information on implementation and prior actions; it is not subject to periodic PCs and other conditions linked to remaining disbursements. - If the scheduled review associated with the most recent availability date preceding the augmentation request has not been completed, an augmentation request cannot be approved at an ad hoc review. - A member may request an undrawn disbursement made available upon Board approval of the requested augmentation at an ad hoc review until the availability date of the next scheduled disbursement. - Augmentation requests at ad hoc reviews that do not exceed 25 percent of quota are eligible for approval on a lapse-of-time (LOT) basis. A scheduled review following an ad hoc review must be comprehensive and cannot be completed on a LOT basis. - For arrangements presumed to involve blended PRGT and GRA resources, post-augmentation total access should follow blended-arrangement rules: total concessional financing normally half of total overall access, subject to a cap on concessional component at the norm applicable to unblended arrangements. - Reductions of access: - Access could in principle be reduced, but the Fund will not unilaterally reduce access because of balance of payments developments unless such developments are substantially more favorable than envisaged at approval and the improvement derives in particular from improvements in the external environment. ### Procedural safeguards on high access requests—DSAs and informal Board meetings - Objective: protect PRGT-eligible members’ debt sustainability and the Fund’s concessional resources. - DSA/DSA update requirements: a DSA or DSA update is required for any financing request under the PRGT (augmentation or new arrangement) if it: - (i) involves exceptional access to concessional resources; or - (ii) brings total access, i.e. cumulative disbursements, under all concessional facilities to more than 80 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period, specifically including: - (a) any actual disbursements under the RCF, SCF, ESF, and past ECF arrangements at the time they became available (date of the Board decision), - (b) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not, - (c) any future scheduled disbursements under the ECF; or - (iii) involves a member country with a high risk of debt distress or in debt distress. - A DSA update can be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA if a joint DSA was prepared recently and the analysis would not change the risk of debt distress rating. - Early informal Board meeting requirement: required if a financing request (augmentation or new arrangement) would: - (i) involve exceptional access to concessional financing; or - (ii) bring total access under all concessional facilities to more than 180 percent of quota, based on cumulative past and future scheduled disbursements in any 36-month period, specifically including: - (a) any actual disbursements under the RCF, SCF, ESF, and past ECF arrangements at the time they became available (date of the Board decision), - (b) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not, - (c) any future scheduled disbursements under the ECF. - Typical information to the Board in a 2–3 page note: (i) factors underlying large balance of payments need, considering donor financing, (ii) brief summary of main policy measures and macroeconomic framework, (iii) expected strength of program and capacity to repay the Fund, (iv) analysis of debt vulnerabilities reflecting all projected debt financing including from the Fund, (v) reference to impact on the Fund’s concessional resources, (vi) likely timetable for discussions with authorities, (vii) a selected indicators table and, if possible, standard DSA charts. - The meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Additional safeguards: - Staff to provide early notice to the Board (e.g., informal country matters session) of upcoming arrangement requests or augmentations where envisaged financing commitment would have a large impact on the Fund’s overall concessional resources. - Exception: new financing requests of 10 percent or less of quota do not trigger either the need for a DSA update or a Board briefing. ### Financing terms - Repayment terms: - Repayments of ECF credit are made in 10 equal semi-annual installments. - Subject to a 5.5-year grace period from the date of the first disbursement and 10-year final maturity. - Authorities may make early repayments at any time, but would not be expected to do so. - Interest: - Interest is paid semi-annually. - The interest rate on ECF credit is currently set at zero percent, but subject to biennial Board reviews that take account of developments in world interest rates. - At each review, interest rates would normally be adjusted if warranted by the prevailing SDR rate, within a 0.0–0.5 percent range for the ECF. - The new interest rate would apply to all outstanding ECF credit. - The next such review is scheduled for December 2014. ### Financing assurances, arrears, and safeguards - Financing assurances: - ECF arrangements and reviews can only be approved/completed when the program is fully financed. - Donors and creditors must furnish assurances that they will provide necessary support through new loans and/or refinancing to meet program financing requirements on terms consistent with return to external viability. - Staff should confirm no unfilled financing gaps over the 12 months immediately following approval of the arrangement (and the completion of each review), and a clear expectation that the program will be fully financed through the remainder of the arrangement period. - Assurances should also indicate that the member country has the capacity to repay the Fund based on medium-term balance of payments projections and, for new arrangements or augmentations, the standardized table on indicators of the capacity to repay the Fund. - Arrears to official creditors: - Fund’s policy of non-toleration of sovereign arrears to official (multilateral and bilateral) creditors: calls for resolution of existing arrears to official creditors and non-accumulation of new arrears during the program. - Existing arrears need not be settled immediately and can be addressed in various ways depending on creditor type; country teams should seek LEG and SPR guidance. - Macroeconomic program assumptions should be consistent with expected resolution of existing arrears to official creditors; authorities and staff should have common understandings on timing/modalities of arrears clearance. - Assumptions on arrears clearance do not prejudge eventual agreements between member and official creditors; staff should have reasonable assurances that arrears clearance understandings are realistic. - Arrears to private external creditors and Lending into Arrears (LIA) policy: - LIA policy applies to sovereign arrears to external private creditors and non-sovereign arrears arising from exchange controls. - The Fund can lend, on a case-by-case basis, in a situation of sovereign arrears to private external creditors only where: - (i) prompt Fund support is considered essential for successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with private creditors (or facilitate a collaborative agreement) and good prospects exist for removal of exchange controls. - Whenever the LIA policy applies, each Fund disbursement under an arrangement is subject to a financing assurances review in which the Board considers, inter alia, whether adequate safeguards remain in place for further use of the Fund’s resources and whether the member’s adjustment efforts are undermined by developments in creditor-debtor relations. *Source: Excerpt of IMF text on Extended Credit Facility financing, augmentations, procedural safeguards, financing terms, and arrears policy.* ### 49. ECF-supported programs should also address domestic arrears as part of the overall ### _082714 - 49. ECF-supported programs should also address domestic arrears as part of the overall ### Overdue obligations to the Fund - A request for IMF financing, including under the ECF, will not be approved and disbursements under an existing arrangement will be suspended where a member is in arrears to the Fund in the GRA, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee (including the PRGT) until the arrears are cleared (PRGT Instrument, Section II, paragraph 1(e)(3) and 3(g)). - After one month the Managing Director will notify the Executive Board that an obligation is overdue. - In the case of protracted arrears to the Fund (i.e., arrears of more than six months’ duration), semi-annual reports are to be issued to the Executive Board. - The Managing Director may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where the Managing Director judges that there is no basis for an earlier evaluation of the member’s cooperation with the Fund. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance, and, under certain circumstances, SMPs. - Remedial measures for dealing with PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation, and suspension of technical assistance. ### Safeguards assessments policy - Staff should aim to complete a safeguards assessment prior to Executive Board approval of a new ECF arrangement; a safeguards assessment report should be completed for each new arrangement no later than the first review under the arrangement and for all augmentations for existing arrangements. - Once the first review under the program has passed, subsequent staff reports should highlight the status of assessment and, if not completed, reasons for its delay. - The safeguards process involves continuous analysis of information obtained primarily through collection of documents, and discussions with the authorities and the central bank’s external auditors. - The safeguards assessment evaluates the central bank’s safeguards framework covering governance, auditing, financial reporting, control systems, and its legal autonomy over the life of an arrangement and for as long as Fund credit remains outstanding. - Safeguards assessments recommendations may be incorporated into conditionality or structural measures under the member’s program. - Close cooperation and coordination between FIN, other functional departments, and area departments is essential; FIN should be kept informed by area departments of safeguards issues, including logistical issues such as the timing of new arrangements and reviews. ### Program objectives - All ECF-supported programs are aimed at making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - ECF-supported programs should aim to maintain or move toward: - strong and durable poverty reduction and growth; - low or moderate inflation; - sustainable fiscal and current account balances; - limited debt vulnerabilities; - adequate international reserves; - sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - The design of an ECF-supported program should be aligned with the country’s own poverty reduction and growth objectives. - Specific policy objectives that should be clearly articulated in the LOI/MEFP and associated staff report for a new ECF arrangement typically include: - Fiscal policies: (i) fiscal stance well anchored to ensure macroeconomic stability and fiscal/debt sustainability, (ii) revenue and spending policies that take due account of growth and social objectives, (iii) budgets guided by medium-term fiscal frameworks to the extent possible. - Monetary policies: consistent with inflation, exchange rate, and reserve objectives, while taking due account of cyclical considerations. - Exchange rate policies: ensure a unified exchange rate and a real exchange rate level broadly in line with fundamentals, ensuring a stable and sustainable external position consistent with adequate growth. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: ensure resources are tracked, reported, and targeted appropriately (including adequate resources for social and other priority spending); public debt management aimed at supporting debt sustainability; revenue reforms aimed at broadening the revenue base and enhancing tax efficiencies. - Other structural reforms critical for achieving the program’s macroeconomic objectives. ### Role of ECF financial support - Balance of payments support under ECF arrangements can assist countries in smoothing the adjustment process toward a more stable and sustainable macroeconomic position. - Fund financial support can be used to: - strengthen the international reserve position of the member country, and - provide liquidity for making external payments. - By relaxing external financing constraints, Fund support also loosens domestic liquidity constraints of both the public and private sector, reducing the need for retrenchment in public and private savings-investment balances and enhancing policy options (allowing less contractionary fiscal, monetary, and exchange rate policies) and cushioning private sector adjustment. - The appropriate mix of financing and public/private adjustment is determined on a case-by-case basis. - A member may use the domestic counterpart of resources received under an ECF arrangement to finance, directly or indirectly, the budget deficit of the government consistent with the Fund’s legal framework where the member has balance of payments problems and is implementing a program to resolve them. - Direct budget support may be appropriate when: - (i) the program envisages that the entire amount of the Fund’s financial support is used to meet a present or prospective balance of payments need, - (ii) loosening fiscal financing constraints is an important macroeconomic objective under the program, - (iii) the central bank cannot or should not lend to the government while the domestic financial sector is too shallow or not stable enough to provide necessary budget financing (or the central bank plays a largely passive domestic policy role, e.g., under a currency board or in a fully dollarized economy). - Staff reports should justify the use of the domestic counterpart of ECF resources for budget financing where relevant and discuss safeguards implications. ### Links to poverty reduction strategies and social spending - ECF-supported programs should be aligned with the country’s own poverty reduction and growth objectives. - Any financing request or program review under the ECF must be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives; the description is expected to be more detailed at initial program request or when a new PRSP (or I-PRSP) is produced. - If a PRS document exists, the ECF-supported program should be consistent with the objectives of the PRS in the context of making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - If no relevant PRS document exists, program documentation should outline the country’s medium-term poverty reduction and growth objectives and policies; subsequent program documents should refer to and update this documentation as necessary. - The second (and every subsequent) review can only be completed if a PRS document has been issued to the Board, normally within the previous 18 months and has been the subject of staff analysis, including in the staff report on a new ECF arrangement or on a review. - It is permissible to meet PRS documentation requirements for the second or any subsequent review by describing in the LOI/MEFP how the current budget, the upcoming fiscal budget (if available), and planned structural reforms advance PRS implementation, subject to specified conditions. - Staff should inform authorities at an early stage about the Definitions and Timelines for PRS Documentation requirements to ensure adequate time for the PRS process. - Staff are required to prepare a Joint Staff Advisory Note (JSAN) for PRSPs and I-PRSPs and circulate it to the Executive Board for discussion or information, generally within four months of transmission of a PRSP or an I-PRSP (outside the HIPC context); for APRs, it is good practice to provide feedback via an Annual Feedback Process (AFP). - Social and other priority spending should be safeguarded and, whenever appropriate, increased under ECF-supported programs. - This should be monitored through explicit program targets, typically an indicative floor on social and other priority spending, whenever possible. - The definition of social or other priority spending should be established by the member, in accordance with the authorities’ poverty reduction and growth strategy. - Where tracking of such expenditures is not feasible, program documentation should report on measures envisaged to develop an adequate tracking system; staff should monitor progress and the program may include relevant structural benchmarks if appropriate. ### Debt sustainability analysis (DSA) - ECF-supported programs should be underpinned by a thorough DSA to inform the elaboration of medium-term debt strategies and fiscal frameworks. - Country teams should engage with the authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for most LICs are usually prepared jointly with the World Bank, and country teams should also involve other relevant Multilateral Development Banks (MDBs). - Joint DSAs are required for all PRGT-eligible countries that also have access to IDA resources; where PRGT-eligible countries have durable and substantial access to market financing, Fund staff may deem it more appropriate to produce a DSA using the template for market access countries, with close consultation with the Bank. - A fully elaborated DSA is required at least once every three years, with shorter annual updates in the interim years possible in the absence of significant changes in the macroeconomic and financial environment. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - The timing of a DSA may be driven by program requirements; the design of debt limits under an ECF arrangement is systematically related to the assessment of countries’ debt vulnerabilities. - The determination of access to the Fund’s concessional resources needs to take account of the country’s debt vulnerabilities based on the most recent DSA; a DSA (or DSA update) may be needed for higher access financing requests. - Where a DSA is required outside the regular joint Bank-Fund DSA cycle, a DSA update may be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA as long as a joint DSA was prepared recently and the analysis would not result in a change of the risk of debt distress rating. - DSAs for LICs should be presented as self-contained documents and should normally be prepared using the LIC Debt Sustainability Framework (DSF); for countries with durable and substantial access to market financing, the template for middle-income countries can be used. - The analysis includes three components: - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit assessment of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions in the country; - Recommendations on a borrowing (and lending) strategy to limit the risk of debt distress, while maximizing the resource envelope to achieve the country’s development objectives. *Source: _082714 - 49. ECF-supported programs should also address domestic arrears as part of the overall* ### 61. Fund staff should consult closely with all major development partners active in the country ### _082714 - 61. Fund staff should consult closely with all major development partners active in the country ### Consultation and collaboration - Fund staff should consult closely with all major development partners active in the country when designing and monitoring an ECF-supported program. - The Joint Management Action Plan (JMAP) approved by the Boards of the World Bank and IMF calls on Bank and Fund country teams to consult with each other at least once a year to: - identify the country's key macroeconomic and structural reform challenges; and - coordinate work plans in support of addressing these challenges (see Appendix I). ### H. Conditionality — Conditionality principles - Conditionality under an ECF arrangement is intended to: - ensure that Fund resources are provided to assist members in resolving their balance of payments problems in a manner consistent with the Fund’s Articles; and - establish adequate safeguards to the Fund’s resources. - Consistent with the Fund’s Guidelines on Conditionality: - conditions will normally consist of macroeconomic variables and structural measures reasonably within the member’s direct or indirect control; and - conditions are generally either (i) of critical importance for achieving the goals of the program (or for monitoring program implementation); or (ii) necessary for the implementation of specific provisions of the IMF Articles of Agreement or policies adopted under them. - In some cases, conditions may be outside the Fund’s core areas of expertise; a more detailed explanation of their critical importance is required in such cases. - ECF-supported programs must meet the UCT conditionality standard, which requires the commitment and capacity by the authorities to implement a set of policies adequate to correct external imbalances and enable repayment to the Fund. - The appropriate adjustment path is determined on the basis of the country’s economic circumstances and objectives, policy constraints, and the severity of the balance of payments needs. - The adjustment effort required to attain full sustainability would often extend beyond the duration of the ECF arrangement; conditionality is therefore limited to those policies critical to achieving the part of the overall adjustment process covered by the arrangement. - Given its medium- to longer-term focus, the ECF generally permits more flexibility than the SCF in the timing of measures (e.g., include steps marking progress on far-reaching structural reforms without completing the entire reform). ### H. Conditionality — Specification of program conditions - Program conditionality components: - quantitative periodic and continuous PCs; - typically quantitative and structural benchmarks; and - prior actions if necessary. - Conditionality is set at approval and updated at reviews. Conditionality should normally be set (or modified) by the Board before the test date. - For post-dated PCs: - program documents must be signed and circulated to the Board along with the staff report before the test date; - no information on implementation of such conditionality would be available at the time of the Board meeting. - Prior actions: - are measures expected to be adopted prior to Fund approval, completion of a review, or granting of a waiver when critical for successful implementation; - are to be applied parsimoniously and justified in terms of criticality to program objectives; - must be specified in clear, objective, and unambiguous terms; - should in principle be implemented at least five working days before the Board discussion; - should be defined in the LOI/MEFP and cross-referenced in the relevant Board Decision. - Timing and frequency of quantitative targets: - Quantitative PCs would normally be set on a semi-annual basis and tied to semi-annual program reviews. - Quantitative benchmarks (indicative targets) would normally be specified on a quarterly basis. - Where closer monitoring or more flexibility is needed, quantitative PCs and reviews could be scheduled no more than six months apart and each scheduled review must be associated with a set of performance criteria and a disbursement. - Conditionality should cover the 12 months following the Board meeting (initial approval or review). - Under semi-annual monitoring, PCs would normally be established for two future test dates at approval and at each review (except for the penultimate and final reviews). - Typical periodic PCs: - measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, and other macro-critical indicators; - limit on nonconcessional external debt (could be set as periodic or continuous PC). - PCs are usually subject to program adjustors reflecting deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible and may include other indicators such as reserve money. - Continuous PCs typically include: - commitments related to non-introduction or intensification of exchange restrictions; - non-introduction or modification of multiple currency practices; - non-accumulation of external payments arrears; - may include the non-contracting of nonconcessional external debt. - Structural reform agenda: - ECF arrangements should include an agenda for macro-critical structural reforms, with appropriate flexibility on timing. - Structural benchmarks serve as clear markers for progress in implementing critical structural reforms and should be used parsimoniously with explicit macro-criticality justification in program documents. - Reviews are the primary tool for monitoring structural elements; specific objectives should be defined for periods covered by individual reviews with related structural benchmarks. - The appropriate number of structural benchmarks depends on country-specific factors, including centrality of structural reforms and country capacity. - The use of structural PCs was discontinued in 2009. - Under the ECF, structural benchmarks may be targeted for implementation either by a specific test date or by the time of a specific program review. - Delays and modifications of structural benchmarks: - Any structural benchmark significantly delayed can be re-dated and re-linked to the next program review if it remains macro-critical. - If implementing a benchmark is no longer possible as defined, a new or modified benchmark may be appropriate if critical to program goals. ### Waivers and modifications - Waiver for non-observance of a PC: - May be granted if the Fund is satisfied the program will nevertheless be successfully implemented because of minor or temporary nature of the nonobservance or remedial actions taken by the authorities. - Upon verification that a PC was not met, a request for a waiver can be made by the member in the LOI. - If staff supports the waiver, the staff report provides justification and a proposed decision on the waiver. - Waivers for nonobservance are only required for quantitative PCs tied to the specific disbursement and the review being completed (and for any standard continuous PC that has been missed). - Waivers for PCs tied to subsequent disbursements and reviews are not required even if information on nonobservance already exists; staff report and LOI/MEFP must provide assurances that understandings on appropriate policies have been reached to complete the subsequent review. - Waivers of applicability: - Could in principle be granted if information necessary to assess observance is unavailable but the Fund is satisfied the program will be successfully implemented and there is no clear evidence the PC has not been met. - Under the ECF, waivers of applicability would be highly unusual because each ECF disbursement is linked to specific PC test dates and a specific review. - In arrangements with blended financing, waivers of applicability would be required for the GRA-financed arrangement if the review is conducted after the most recent test date has passed and data are not yet available. - For the GRA financial arrangement, the member may purchase any amount available based on earlier completed reviews if the purchase is requested within 45 days of the most recent test date and all conditions specified in paragraph 2 of the Reduction of Blackout Periods in GRA arrangements decision (Decision No. 14407-(09/105)) are met. - Modifications to Board-set conditionality: - May be appropriate when departures from PCs are expected due to unrealized basic program assumptions or significant unanticipated developments, provided targets remain macro-critical. - Requests for modifications must be submitted to the Board before the relevant test date has been passed and approved by the Board before information on observance is available, normally in the context of a program review. - In exceptional cases, Board approval of modifications outside a program review is possible if authorities and staff have common understandings documented in a revised or new LOI with an updated PC table and, where relevant, an updated TMU. - Board approval outside a review requires a staff report discussing reasons for modification, status of the program, and relevant policy understandings. ### Misreporting - Definition and procedure: - Misreporting occurs when members obtain resources on the basis of inaccurate information regarding observance of quantitative or continuous PCs or prior actions (a “noncomplying disbursement”). - Under the ECF, a noncomplying disbursement occurs when (i) the Fund makes a disbursement on the basis of a finding that applicable conditions established for that disbursement have been observed and (ii) that finding later proves to be incorrect. - Upon evidence that a member may have received a noncomplying disbursement, the Managing Director shall inform the member promptly. - After consultation, if the Managing Director determines a noncomplying disbursement occurred, the Managing Director shall promptly notify the member and submit a report to the Executive Board with recommendations. - The Board may decide either (a) that the member shall be expected to repay the disbursed amount, or (b) that the nonobservance will be waived. - Waivers will normally be granted only when the deviation was minor or temporary, or if the member adopted additional measures appropriate to achieve the objectives supported by the relevant decision. - De minimis misreporting: - Whenever the Executive Board finds that the noncomplying disbursement has been made but the nonobservance was de minimis (so small as to be trivial with no impact on assessment), a waiver for nonobservance shall be granted by the Executive Board. - De minimis misreporting will not be published in a staff report. ### I. Reviews and Disbursements — Purpose of program reviews - Program reviews: - Evaluate whether the program is on track to achieve objectives based on backward-looking assessment (performance against quantitative PCs, structural and quantitative benchmarks, and prior actions) and a forward-looking assessment of prospects for successful implementation, particularly whether policy capacity and commitments are adequate. - The second (and every subsequent) review can only be completed if a PRS document has been issued to the Board normally within the previous 18 months, with one exception: - if a PRS has been issued to the Board and covers at least 12 months from the date of the completion of the review, this requirement can be met by describing in the LOI/MEFP how the current budget, the upcoming fiscal budget (if available), and planned structural reforms advance the implementation of the PRS. - At the final review, assuming the protracted balance of payments problem is resolved and no further Fund support is expected, the forward-looking assessment scope could be more limited. - Reviews update program design and are the main vehicle for potential modifications to program design (changes in access, phasing, and conditionality). - At approval and each review: - the authorities’ LOI presents or updates their policy program; and - a staff report provides an overall assessment of performance and policy commitments. ### I. Reviews and Disbursements — Timing of reviews, test dates, and disbursements - The timing of all reviews, test dates, and disbursements is summarized in a staff report table at approval and updated as needed at reviews. - The Arrangement text attached to the staff report for the initial ECF request specifies the test dates, reviews, availability dates, and disbursements for the first year. - The quantitative indicator table (“PC table”) attached to the LOI/MEFP should clearly identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date of approval or review. - The structural benchmark table should cover measures over at least a 12-month period, indicating the reviews individual benchmarks are linked to and/or implementation dates. - The Decision attached to the staff report should specify all PCs and review/availability dates, normally over the next 12 months from the Board date of approval/review. - Disbursement sequencing: - The first disbursement is made available upon approval of the arrangement. - Subsequent disbursements are conditional on observance of the PC and a program review confirming satisfactory progress. - Under a standard three-year ECF arrangement: - Reviews and disbursements are normally semi-annual, implying typically seven scheduled disbursements and six reviews (and thus six test dates with PCs). - When designing test date schedules, align with the country’s budget cycle and the requirement that reviews be scheduled no more than six months apart. - There is flexibility in setting specific review and test dates to reflect country circumstances. - Deviations from the six-monthly schedule (more frequent reviews) can be considered to align monitoring with national budget/reporting cycles. - If the arrangement is approved well before the first test date (e.g., four months or earlier), there may be only six disbursements and five reviews due to time lag in monitoring and preparing documentation. - Reviews and disbursements could be both more frequent in the context of significant short-term volatility and/or uncertainty. - It is possible to shift between semi-annual and higher frequencies of phasing during the course of an arrangement; such shifts could be scheduled at approval if warranted based on projected risk profile over time or other country circumstances. *Source: _082714 - 61. Fund staff should consult closely with all major development partners active in the country* ### 80. The test dates for PCs must be set such that all scheduled disbursements can take place ### 80. The test dates for PCs must be set such that all scheduled disbursements can take place ### Test dates, availability dates, and disbursement scheduling - Test dates for performance criteria (PCs) must be set so that all scheduled disbursements can take place before the end of the arrangement, taking into account reporting lags and preparation and circulation periods for staff reports. - Availability dates for disbursements should be set so that all data needed to confirm observance of PCs at the related test dates would have become available. - Availability dates are specified in the Arrangement text and subsequent Decisions, and are summarized in the staff report table on the schedule of disbursements. - Reviews cannot be completed prior to the applicable availability date. - As provided in the PRGT Instrument, reviews under an arrangement shall not be completed unless and until all other conditions for the disbursement of the loan have been met or waived. This applies, inter alia, with regard to the condition on the availability of the disbursement. ### Program period timing and blackout-period policy - The program period supported by an ECF arrangement would typically start somewhat before the Board approves the ECF arrangement, and three to six months before the first test date under semiannual monitoring. - The program period should normally not start more than three months prior to the Board meeting, and in any case not before the authorities and staff have discussed the parameters of the program. - In contrast to SBAs or EFF Arrangements, the design of an ECF arrangement avoids “blackout periods” because: - each disbursement is linked to the completion of a specific review and to the observance of specific periodic performance criteria; - a disbursement is not blocked when a new test date passes, because such new test date applies to a future disbursement subject to completion of a future scheduled review. - The broader policy on reduction of blackout periods applies to all SBAs and EFF arrangements, including those that involve blending with ECF financing. ### Addressing interruptions in program implementation: track records, combined reviews, and rephasing - Interruptions and delays in ECF-supported programs can occur. If caused by substantial policy slippages, it is often appropriate to establish a track record before completing the next review. - A track record could be: - informal (based on informally agreed time-bound policy actions and targets), - monitored more formally under an SMP, or - in case of urgent financing needs caused by an exogenous shock, under the RCF (assuming applicable policy commitments are in place). - Delays and interruptions can be addressed through extensions of the arrangement, combining reviews, rephasing of access, or combinations of these measures. - Combining reviews: - Under certain circumstances, two reviews can be combined when delays have occurred and performance can be assessed against two test dates linked to successive reviews. - Combining three or more reviews would be very unusual because PCs are typically not defined for more than two future test dates under semiannual monitoring, and the ECF arrangement is automatically terminated if no review is completed over an 18-month period. - Reviews may be combined only if: - (i) the conditionality has been fully defined, including through applicable PCs, for these reviews and approved by the Board; - (ii) data are available for measuring observance of conditionality for the reviews; and - (iii) the dates specified as the earliest dates for conclusion of the reviews in the text of the arrangement have all passed. - Reviews are typically combined when the program is on track with respect to the most recent review and sufficient corrective action has been taken to offset problems with observance of earlier reviews. - Where slippages relative to the objectives and conditionality for the most recent review are significant, it would not be appropriate to combine reviews. In such cases, authorities could request cancellation of the arrangement and discuss support under a new instrument, or complete the past review (if earlier performance was broadly satisfactory) and establish a new future test date and conditionality, typically combined with rephasing of access. - Rephasing disbursements: - Disbursements under an ECF arrangement may be rephased to change amounts associated with specified reviews and/or change the number or timing of disbursements and reviews. - If delays cannot be accommodated by extensions or combining reviews alone, the total amount of access can be rephased into a new pattern of test dates and reviews, generally only after making full use of the maximum possible extension. - Access should never be rephased in a manner that would make it impossible for the member to get the full, undisbursed amount under the arrangement. - If rephasing would compress a very large amount of access into a short period (even with a potential extension), it would normally be appropriate to let the current arrangement expire, or for the member to cancel it, and proceed to a new ECF arrangement with more attainable goals, unless there has been a very sharp turnaround in performance. ### Other relevant policies (selected modalities and requirements) - Ex Post Assessments (EPAs): - Access to resources under ECF arrangements counts toward the policy on longer-term program engagement (LTPE). - Members that have had a UCT arrangement in place for at least seven out of the past ten years, and for whom an EPA has not been prepared in the past five years, an EPA should be prepared in time to be considered by the Board prior to a request for a new arrangement. - Post-Program Monitoring (PPM): - Outstanding ECF credit will be subject to PPM. - Normally, members with outstanding credit from the Fund in the GRA and/or PRGT exceeding 200 percent of quota after the expiry of their arrangements are expected, upon the recommendation of the Managing Director, to engage with the Fund in PPM (unless the member is implementing a Fund-supported program or SMP). - Article IV cycle: - The 24-month cycle for Article IV consultations applies to members with an ECF arrangement. - Article IV consultations with members that have an on-track ECF arrangement in place would be expected to be completed within 24 months after the completion of the previous Article IV consultation. - If a program review is not completed by the date for completion specified in the arrangement, the next Article IV consultation would be expected to be completed by the later of: - (i) six months after the scheduled review date; and - (ii) 12 months, plus a grace period of three months after the previous Article IV consultation, - unless the program review has been completed prior to the later of these two dates, in which case the 24-month cycle continues to apply. - A member that has completed an ECF arrangement by drawing all amounts may remain on the 24-month cycle, if it does not meet any of the criteria specified in paragraph 2 of Decision No. 14747-(10/96): (i) the member is of systemic or regional importance; (ii) the member is perceived to be at risk, or is facing pressing policy issues of broad interest to the Fund membership; or (iii) the member has outstanding Fund credit exceeding 200 percent of quota. - At the time of the final review under the arrangement, staff should assess whether the consultation cycle should be shortened back to 12 months, based on the criteria mentioned above. The staff report for the final review should seek the Board’s approval of such shortening when appropriate. - Where the arrangement is cancelled by the member or expires with undrawn amounts, the member will remain on the existing cycle, unless the Executive Board determines, based on the above criteria, that a different cycle will apply. - Exchange System obligations and data provision: - A standard continuous PC applies, inter alia, to the non-introduction or intensification of exchange restrictions and on the non-introduction or modification of multiple currency practices. - Article VIII, Section 5 of the Fund’s Articles of Agreement does not apply to the provision of information that is required for the purposes of Fund financial assistance under the ECF. - HIPC and MDRI: - Performance under an ECF arrangement can count toward a track record of strong policy performance required for the HIPC decision point and completion point. - The minimum required track record is six months for the decision point and one year for the completion point. - Side letters: - Use of side letters in LIC programs has been extremely rare. - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine the authorities’ efforts to prepare the domestic groundwork for a measure. *Source: _082714 - 80. The test dates for PCs must be set such that all scheduled disbursements can take place* ### 91. Qualification also requires a finding by the Board that the member is implementing, or is ### _082714 - 91. Qualification also requires a finding by the Board that the member is implementing, or is ### Qualification and program requirements - Qualification requires a Board finding that the member is implementing, or is committed to implement, policies aimed at resolving the balance of payments difficulties it is encountering or could encounter, in the context of a policy program that meets UCT conditionality standards and aims to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction. - Qualification requires: - commitment and capacity by the authorities to implement a set of policies adequate to correct external imbalances and enable repayment to the Fund within the specified maturity period; - elaboration of such a program in the LOI and MEFP; - assurances of capacity and commitment evidenced by recent policy performance (including under a recent Fund-supported program), institutional capacity, and other circumstances affecting macroeconomic performance. - Qualification is presumed (but must still be established) for countries with an on-track PSI that experience or may experience a balance of payments need (present, prospective, or potential). ### Pathways to build capacity for SCF qualification - Countries not currently able to meet SCF qualification (particularly capacity to implement a UCT-quality program) can build a track record through: - an SMP; or - the RCF in case of urgent financing needs (assuming applicable policy commitments are in place). - Countries with capacity to implement a UCT-quality program but with balance of payments needs expected to be resolved within one year and requiring no major policy adjustments may request RCF financing for urgent needs. ### Duration, extensions, cancellations, and repeated use - SCF assistance availability: - minimum of 12 months and a maximum of 24 months from the date of the Board decision approving the arrangement. - Normal use limit: - normally limited to two and a half years out of any five-year period, assessed on a rolling basis. - Past SCF arrangements treated in their entirety as precautionary (i.e., not one disbursement was made) and prospective SCF arrangements for which the Fund assesses that the member does not have an actual balance of payments need at the time of approval are not counted towards the two and a half year limit. - Extensions: - SCF arrangements may be extended (including multiple times) subject to a 24-month maximum total duration. - Extensions must be requested by the member and approved by the Board before the expiration of the arrangement period. - Extensions are only possible if needed to allow for the disbursement of amounts under the arrangement; cannot extend when all scheduled amounts have already been disbursed. - Arrangements automatically expire once all available amounts have been disbursed. - Cancellations: - SCF arrangements may be cancelled by the authorities at any time (e.g., when macroeconomic imbalances resolved, authorities lack capacity or commitment, or objectives/modalities of policies changed substantially). - Repeated use: - After expiration or cancellation, additional SCF arrangements may be approved if qualification criteria are met, including overall time limit on use. ### Extensions involving rephasing and procedural requirements - Rephasing (changes in timing and level of programmed disbursements) and augmentations: - Extensions can allow disbursement of rephased amounts or provide additional resources (augmentation) subject to appropriate conditions consistent with SCF terms. - Rephasing may be appropriate when more time is needed to implement policies/reforms, when duration of balance of payments needs is longer than envisaged, or due to additional shocks or heightened risks. - Extensions may involve establishment of additional reviews and can be combined with augmentations if warranted. - Approval basis: - Normally approved by the Board on the basis of an LOI and in the context of a program review (where the review demonstrates the program is on track). - In exceptional circumstances, extensions involving rephasing may be approved outside a scheduled program review, provided documented understandings on appropriate policies exist and a staff report explains reasons, status, and policy understandings. - Short-term/technical extensions: - For cases not involving rephasing or changes in access, short extensions (a few weeks or months) can be granted to complete final review(s) and make final disbursement available, subject to Board approval and a short staff paper for lapse-of-time approval. ### Concurrent use: rules and constraints - SCF cannot be used concurrently with the ECF; any pre-existing ECF arrangement must be cancelled before an SCF arrangement can be approved and vice versa. - A member cannot obtain RCF financing (or start an SMP) if an SCF arrangement is in place and on track. - RCF financing during an SCF arrangement can be provided only when: - (i) SCF disbursements are not possible (e.g., due to policy slippages or delays in program discussions); - (ii) qualification requirements for the RCF are met, including the existence of an urgent balance of payments need and relevant policy commitments; - (iii) the balance of payments need is primarily caused by a sudden exogenous shock. - When access under the RCF exceeds 25 percent of quota in these circumstances, policies should be appropriate to address the shock. - RCF-supported policies could serve as a track record to bring the SCF-supported program back on track; absent urgent needs, a track record could be built through an SMP. - The SCF can be used concurrently with GRA financing under certain circumstances. ### SCF and PSI interaction - SCF can be used flexibly in conjunction with a PSI: - PSI does not provide automatic access to SCF financing, but SCF qualification is presumed for countries with an on-track PSI that experience or may experience a balance of payments need, provided qualification requirements are met. - No need to cancel the PSI; an SCF can run concurrently with a PSI. - PSI users can request concurrent precautionary support under the SCF. - If PSI is off track, SCF approval typically occurs only after appropriate corrective actions. - Modalities of concurrent PSI and SCF support: - Support an economic program based on a single set of program conditions, schedule of reviews, and other requirements mirroring stand-alone SCF or PSI arrangements. - Key differences include: - Choice of SCF duration (between 12 and 24 months) depends on financing and adjustment needs and not necessarily tied to the PSI period. - If SCF expiration comes after PSI expiration, approval of a new PSI would normally take place only after expiration or cancellation of the SCF arrangement, since PSI qualification requires a broadly stable and sustainable macroeconomic position (i.e., no IMF financing needed). A new PSI could be approved if SCF is treated as precautionary. - An SCF arrangement does not require issuance of a PRS-related document, but such a document must exist by the time of completion of the second and subsequent reviews of a PSI. - The PSI review schedule could remain on the “fixed review cycle” or be aligned to the more flexible SCF review cycle. Shifting to the SCF review schedule requires adjusting PSI decision language. ### Blending of PRGT and GRA resources with SCF - Certain PRGT-eligible countries are expected to receive assistance through blended PRGT and GRA resources rather than fully concessional financing. - When financing is blended under a PRGT arrangement and a GRA arrangement, total access is determined based on standard criteria so total access should be comparable across country cases with similar needs, program strength, and outstanding Fund credit. - PRGT-eligible countries, including those qualifying for an SCF arrangement, are expected to use either fully concessional or blended resources rather than GRA-only financing, though they remain eligible for general resources. ### Blending presumptions and limitations - Blending presumptions: - Blending is presumed (including for precautionary SCF arrangements) for PRGT-eligible countries with either: - (i) per capita income above the prevailing operational cutoff used by IDA; or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. - As of July 2014, the IDA operational cutoff was US$1,215. - A member is presumed to have had past market access if it tapped international financial markets during at least two of the last five years, and with total access over the five years amounting to a minimum of 50 percent of quota. - Limitations: - Blending should normally not be used for countries at high risk of debt distress or in debt distress as assessed by the most recent joint Bank-Fund LIC DSA, 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. ### Modalities and differences when blending SCF and GRA (SBA) resources - When blended resources are provided: - SCF resources will normally be provided together with GRA resources under the SBA. - Financing through the RFI under the GRA during an SCF arrangement would be expected only if the SCF-supported program is off track, in which case RFI purchases would typically be combined with disbursements under the RCF. - Differences relative to stand-alone SCF arrangements: - Disbursements would involve both SCF and SBA resources, implying lower average concessionality than under a stand-alone SCF arrangement. - SBA qualification requirements must be met—if the blend pushes access above GRA normal limits, the member would also need to meet the Exceptional Access criteria. - Respective effectiveness and expiration dates of SCF and SBA arrangements would normally be identical, but it may be possible to blend SBA resources with duration of more than 24 months with a 2-year SCF if SCF qualification requirements are met, including absence of a protracted balance of payments need. - Reviews under the SBA component of blended assistance may require waivers of applicability under certain circumstances. - Each disbursement under an SCF arrangement is linked to a specific test date, whereas GRA purchases are conditioned upon observance of the PCs relating to the most recent test date. This can produce situations where SCF-component disbursements are available (if earlier test-date PCs met) while SBA-component disbursements are not (if PCs relating to the most recent test date have not been observed) unless waivers are granted. *Source: STANDBY CREDIT FACILITY (excerpt).* ### 106. When considering access for a new arrangement, or possible augmentation under an ### _082714 - 106. When considering access for a new arrangement, or possible augmentation under an ### Determination of access—main criteria - Access is determined on a case-by-case basis based on three standard criteria: - (i) the member’s (present, prospective, and potential) balance of payments needs (taking into account all projected balance of payments flows, including reserve accumulation and financing from other sources). - (ii) the strength of its program and capacity to repay the Fund (taking into account the member’s policy plans, adjustment effort, commitment to implement the program, institutional capacity, track record of policy implementation, and country circumstances such as vulnerabilities, imbalances, and debt sustainability). - (iii) the amount of outstanding Fund credit and the member’s record of past use. - For precautionary arrangements, the baseline scenario should be presented showing no Fund financing; potential needs that might emerge should be highlighted (e.g., how the most volatile external flows may be affected by exogenous shocks or via alternative scenarios). - Staff reports for a new arrangement or for requests to change access should explicitly discuss the basis on which access was determined (or explain reasons for requesting a change), with reference to the main criteria and applicable access norms and limits. - Each individual disbursement under an SCF arrangement requires a member representation of the existence of a present balance of payments need (normally in an LOI); the Fund will not challenge this representation prior to the disbursement but may impose remedial measures after disbursement if it determines the disbursement occurred in the absence of a present need. ### Access norms - Access norm for SCF arrangements (unblended): - 120 percent of quota per 18-month arrangement for countries with total outstanding IMF credit under all concessional facilities of less than 100 percent of quota. - 75 percent of quota per arrangement for countries with outstanding concessional credit of between 100 percent of quota and 200 percent of quota. - Duration adjustments: - For arrangements with duration > 18 months, the norm is increased proportionally. - For arrangements with duration < 18 months, the norm is decreased proportionally. - For countries with outstanding concessional credit above 200 percent of quota, the norms do not apply; access is guided by the cumulative access limit of 300 percent of quota (450 percent of quota in exceptional cases), the expectation of future need for Fund support, and the repayment schedule. - Access norms provide general guidance and represent neither ceilings nor floors; access can deviate from the norms if warranted under the standard criteria (above). ### Access limits (global annual and cumulative limits across concessional facilities) - Normal annual limit across all concessional facilities: total access to financing under the PRGT should normally not exceed 100 percent of quota per year. - This annual access limit refers to past and future scheduled disbursements in any 12-month period, specifically including: - (i) any actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available (date of the Board decision that makes the disbursement available), - (ii) any disbursements to date that became available under the current SCF arrangement, irrespective of whether they have been drawn or not, - (iii) any future disbursements under the SCF at the scheduled availability dates. - Normal cumulative limit across all concessional facilities: total access should normally not exceed 300 percent of quota cumulatively, net of scheduled repayments. - The cumulative access limit requires that total outstanding Fund concessional credit (including disbursements made available but not drawn in the current arrangement) cannot normally exceed 300 percent of quota at any point in time, based on projected disbursements and repayments. - Exceptional access caps (across all concessional facilities, net of scheduled repayments): - Annual hard cap: 150 percent of quota. - Cumulative hard cap: 450 percent of quota. - Criteria for exceptional access (examples): - (i) exceptionally large balance of payments need that cannot be met within normal limits (e.g., very large external shocks, very low levels of reserves), - (ii) comparatively strong adjustment program and ability to repay the Fund (generally not met for countries with a high risk of debt distress or in debt distress unless expected debt relief or restructuring is projected to reduce risk to moderate or low), - (iii) do not meet the income or market access criteria for blending. ### Sub-ceiling for precautionary SCF arrangements - If at approval there is a potential but no actual balance of payments need (precautionary): - Annual access limited to 75 percent of quota. - Average annual access (total access divided by the length of the arrangement in years) cannot exceed 50 percent of quota. - Possibility to augment access later if a larger actual balance of payments need arises. ### Phasing of access - Phasing of SCF access (determined at approval) should mirror the projected evolution of balance of payments needs and must account for applicable annual access limits. - Front-loading or back-loading is permissible if warranted by program strength and/or timing of balance of payments needs. - Significant frontloading could be appropriate in exceptional cases (e.g., repayment of emergency assistance to the Fund, clearance of overdue obligations) and some frontloading may be appropriate for precautionary SCF arrangements. - Standard presentation practice: in any given period scheduled IMF disbursements plus other exceptional financing items should not exceed the overall balance of payments deficit (from “autonomous transactions”) and programmed reserve accumulation; balance of payments should be fully financed at time of SCF approval and completion of each review, with residual financing gaps possibly in outer years. ### Access under blended financial assistance - Total access for blended SCF + GRA arrangements is determined by the standard criteria and should be comparable across similar country cases irrespective of whether assistance is blended or PRGT-only. - Specific rules for blended assistance: - Access to the concessional (SCF) component is normally half of total access, with access to concessional resources capped at the norm applicable to unblended arrangements. - For blended SCF arrangements treated as precautionary, access to the concessional component is capped at the average annual access limit of 50 percent of quota. - All access above the concessional norm is met by GRA financing. - At approval, each scheduled disbursement should generally involve both SCF and GRA resources; phasing and performance criteria for GRA resources apply only to purchases above the first credit tranche. - Shares of SCF and GRA financing at each disbursement can be determined individually and need not remain constant across disbursements. - In exceptional circumstances with very large balance of payments needs, concessional resources under blended assistance could reach annual access limit of 100 percent of quota or the exceptional annual access limit of 150 percent of quota if criteria for exceptional concessional access are met. ### Augmentations and reductions of access - Augmentation purposes: - To meet larger balance of payments need (e.g., shocks) or to support a strengthening of the program (e.g., risk of debt distress subsides). - When arrangement period is extended and extension involves additional balance of payments needs not originally included. - Under the Trade Integration Mechanism (TIM), augmented access not exceeding 10 percent of quota is available to compensate for balance of payments shortfalls arising from trade liberalization measures implemented by other countries. - Determination of augmentation size is based on standard access criteria (balance of payments need and program strength); no formal norm for augmentation size, though many augmentations have been in the range of 15–45 percent of quota, with a few cases well above this range. - Staff reports supporting augmentations must explicitly discuss the basis for the augmentation and its size, with reference to main criteria and applicable norms and limits. - Rules for augmentations of presumed blended PRGT and GRA arrangements: - Total financing mix over the full course of the arrangement should follow blended rules, including that total concessional financing post-augmentation would normally be half of total overall access with a cap at the unblended norm. - Augmentations normally approved at a scheduled review. - Augmentations between scheduled reviews (ad hoc reviews) when needs are acute: - Require Fund Trustee assessment that the program is on track to achieve objectives at time of augmentation; otherwise RCF financing could be requested. - Board assesses observance of continuous performance criteria (PCs) or whether waivers are justified, that prior actions (if applicable) have been met, and that policies are suitable and consistent with program objectives. - Modalities for ad hoc augmentations: - Requests expected to be supported by a short staff report and an LOI describing nature/size of problem, policies undertaken, and implementation information. - Augmentations at ad hoc reviews are only available in a single disbursement following Board approval; no limit on amount subject to overall access limits and norms. - The augmentation is subject to blending rules and may be supplemented by corresponding GRA augmentation. - Disbursement amount is limited to what is immediately needed; additional amounts can be considered in a regular review. - The new disbursement is subject to observance of continuous PCs under the arrangement (including accuracy of information and any prior actions) and any other Board-determined conditions; it is not subject to periodic PCs tied to remaining disbursements. - If the scheduled review associated with the most recent availability date preceding the augmentation request has not been completed, an augmentation cannot be approved at an ad hoc review. - A member may request an undrawn disbursement made available upon Board approval of the augmentation until the availability date of the next scheduled disbursement. - Augmentation requests at ad hoc reviews that do not exceed 25 percent of quota are eligible for approval on a LOT basis; the subsequent scheduled review to consider the augmentation is expected to be a comprehensive assessment and cannot be completed on a LOT basis. *Source: IMF staff guidance from the SCF policy text provided in the content unit.* ### 122. The Fund cannot unilaterally reduce access under the SCF. However, although not envisaged, ### _082714 - 122. The Fund cannot unilaterally reduce access under the SCF. However, although not envisaged, ### Procedural safeguards on high access requests—DSAs and informal Board meetings - Financing requests under the PRGT are subject to safeguards aimed at protecting PRGT-eligible members’ debt sustainability and the Fund’s concessional resources. - A DSA or DSA update is required for any PRGT financing request (augmentation or new arrangement) if it: - involves exceptional access to concessional resources; or - brings total access, i.e. cumulative disbursements, under all concessional facilities to more than 80 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period, specifically: - (a) any actual disbursements under the RCF, ECF, ESF, and past SCF arrangements at the time they became available (i.e., the date of the Board decision), - (b) any disbursements to date that became available under the current SCF arrangement, irrespective of whether they have been drawn or not, and - (c) any future scheduled disbursements under the SCF; or - involves a member country with a high risk of debt distress or in debt distress. - A DSA update can be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA if a joint DSA was prepared recently and the analysis would not result in a change of the risk of debt distress rating. - An early informal Board meeting is required if a PRGT financing request (augmentation or new arrangement) would: - involve exceptional access to concessional financing; or - bring total access, i.e. cumulative disbursements, under all concessional facilities to more than 180 percent of quota, based on cumulative past and future scheduled disbursements in any 36-month period, specifically: - (a) any actual disbursements under the RCF, ECF, ESF, and past SCF arrangements at the time they became available (i.e., the date of the Board decision), - (b) any disbursements to date that became available under the current SCF arrangement, irrespective of whether they have been drawn or not, and - (c) any future scheduled disbursements under the SCF. - Information to the Board at such an early informal meeting would typically be a two to three page note including: - (i) factors underlying the large balance of payments need, taking into account financing from donors, - (ii) brief summary of main policy measures and macroeconomic framework, - (iii) expected strength of the program and capacity to repay the Fund, - (iv) analysis of debt vulnerabilities, reflecting all projected debt financing, including from the Fund, - (v) reference to the impact on the Fund’s concessional resources (drawing on the latest available paper on concessional resources), - (vi) likely timetable for discussion with the authorities, and - (vii) a selected indicators table and, if possible, the standard DSA charts. - The early informal Board meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Staff would provide early notice to the Board (e.g., in an informal country matters session) of upcoming arrangement requests or augmentations where the envisaged financing commitment, in absolute terms, would have a large impact on the Fund’s overall concessional resources. - Exception: new financing requests of 10 percent or less of quota do not trigger the need for a DSA update or a Board briefing. ### Financing Terms (SCF) - Repayment schedule: - Repayments of SCF credit are made in nine equal semiannual installments, - subject to a four-year grace period from the date of the first disbursement and eight-year final maturity. - Authorities may make early reimbursements at any time, but would not be expected to do so. - Interest: - Interest is paid semiannually. - The interest rate on SCF credit is currently set at 0.25 percent, - For the period from January 7, 2010 through December 31, 2014, no interest shall be charged on outstanding balances of SCF credit. - Interest rates are subject to biennial Board reviews that take account of developments in world interest rates. - At each review, interest rates would normally be adjusted if warranted by the prevailing SDR rate, within a 0.25–0.75 percent range for the SCF. - The new interest rate would apply to all outstanding SCF credit. - The next such review is scheduled for December 2014. - Availability fee: - A fee at 0.15 percent per annum is levied on the undrawn portion of the amount available for drawing each six-month period under an SCF arrangement. ### Financing Assurances, Arrears, and Safeguards - Financing assurances: - SCF arrangements can only be approved and reviews completed when the program is fully financed. - Staff must confirm no unfilled financing gaps over the 12 months immediately following approval of the arrangement (and completion of each review) and a clear expectation that the program will be fully financed through the remainder of the arrangement period. - Assurances should indicate the member country has the capacity to repay the Fund based on medium-term balance of payments projections and, for new arrangements and augmentations, the standardized table on indicators of the capacity to repay the Fund. - Arrears: - Fund policy of non-toleration of sovereign arrears to official creditors: the Fund generally calls for resolution of existing arrears to official creditors and non-accumulation of new arrears during the program. - Existing arrears need not be settled immediately and can be addressed in various ways depending on creditor type. - Country teams should seek guidance from LEG and SPR on application to specific creditors. - Macroeconomic program assumptions under the ECF arrangement should be consistent with expected resolution of existing arrears to official creditors. - Arrears to private external creditors: - Covered by the Fund’s Lending into Arrears (LIA) policy. - The Fund can lend in situations of sovereign arrears to private external creditors only where: - (i) prompt Fund support is considered essential for successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with its private creditors (or facilitate such an agreement) and good prospects exist for removal of exchange controls. - When LIA applies, each Fund disbursement under an arrangement is subject to a financing assurances review assessing, inter alia, whether adequate safeguards remain in place and whether adjustment efforts are undermined by creditor-debtor developments. - Domestic arrears: - SCF-supported programs should address domestic arrears as part of program design; policy specification depends on country context and fiscal framework. - Overdue obligations to the Fund: - A request for IMF financing, including under the SCF, will not be approved and disbursements under an existing arrangement will be suspended if the member is in arrears to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or to the Fund as Trustee (including the PRGT), until the arrears are cleared. - After one month the Managing Director will notify the Executive Board that an obligation is overdue; for protracted arrears (more than six months’ duration), semiannual reports are issued to the Executive Board. - The Managing Director may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance and, under certain circumstances, SMPs. - Remedial measures for PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation and suspension of technical assistance. - Safeguards assessments: - Staff should aim to complete a safeguards assessment prior to Executive Board approval of a new SCF arrangement. - A safeguards assessment report should be completed for each new arrangement no later than the first review and for all augmentations for existing arrangements. - Once the first review has passed, subsequent staff reports should highlight the status of assessment and, if not completed, reasons for delay. - The safeguards process involves continuous analysis of information from documents and discussions with authorities and the central bank’s external auditors, evaluating governance, auditing, financial reporting, control systems, and legal autonomy. - Safeguards assessment recommendations may be incorporated into conditionality or structural measures under the program. - Close cooperation between FIN, other functional departments, and area departments is essential; FIN should be kept informed of safeguards issues and timing. ### Program Objectives and Design - SCF-supported programs aim to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Programs typically aim to maintain or achieve: - strong and durable poverty reduction and growth, - low or moderate inflation, - sustainable fiscal and current account balances, - limited debt vulnerabilities, - adequate international reserves, and - sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Program design should align with the country’s poverty reduction and growth objectives. - Specific policy objectives to be articulated in the LOI/MEFP and staff report typically include: - Fiscal policies: (i) well anchored fiscal stance to ensure macroeconomic stability and fiscal/debt sustainability, (ii) revenue and spending policies accounting for growth and social objectives, (iii) budgets guided by medium-term fiscal frameworks where possible. - Monetary policies consistent with inflation, exchange rate, and reserve objectives, considering cyclical factors. - Exchange rate policies ensuring a unified exchange rate and a real exchange rate broadly in line with fundamentals. - Financial sector policies geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms to ensure resources are tracked, reported, and targeted appropriately, public debt management to support debt sustainability, and revenue reforms to broaden the revenue base and enhance tax efficiencies. - Other structural reforms critical for achieving macroeconomic objectives. ### Role of SCF financial support - SCF balance of payments support helps countries smooth adjustment toward a stable and sustainable macroeconomic position. - Fund financial support can: - strengthen international reserves, - provide liquidity for making external payments, - relax external financing constraints and thus loosen domestic liquidity constraints of public and private sectors. - Fund financing reduces the need for retrenchment in public and private savings-investment balances, enhancing policy options (allowing less contractionary fiscal, monetary, and exchange rate policies) and cushioning private sector adjustment (e.g., investment and import declines). - The appropriate mix of financing and public/private adjustment is determined case-by-case. - Use of domestic counterpart of SCF resources: - A member may use the domestic counterpart to finance, directly or indirectly, the government budget deficit. - Direct budget support may be appropriate when: - (i) the program envisages that the entire amount of Fund support is used to meet a present or prospective balance of payments need, - (ii) loosening fiscal financing constraints is an important macroeconomic objective, and - (iii) the central bank cannot or should not lend to the government (legal or institutional reasons) while the domestic financial sector is too shallow or not stable enough (or the central bank plays a largely passive role, e.g., under a currency board or full dollarization). - Staff reports should justify use of the domestic counterpart as budget financing where relevant and discuss safeguards implications. *Source: IMF document excerpt (SCF procedural, financing, assurances, arrears, safeguards, program design and role of SCF).* ### 137. SCF-supported programs should be aligned with the country’s own poverty reduction and ### _082714 - 137. SCF-supported programs should be aligned with the country’s own poverty reduction and ### PRS linkages and program alignment - Any financing request or program review under the SCF must be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives; description expected to be more detailed at initial program request or when a new PRSP (or I-PRSP) is produced. - Where a relevant PRS document exists, the LOI/MEFP description could cross-reference the PRS document. - If a PRS document exists, the SCF-supported program should be consistent with the objectives of the PRS in the context of promoting a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Where a relevant PRS document does not exist, the SCF documentation (e.g., in an attachment to the LOI or MEFP) should outline the country’s medium-term poverty reduction and growth objectives and policies; subsequent program documents should refer to and update this documentation as necessary. - PRS documents are not required for approval or review of an SCF arrangement, consistent with its short-term focus; whenever a future PSI- or ECF-supported program is under consideration, staff should inform authorities early about relevant definitions and timelines for PRS documentation requirements (Appendix V). - PRS documents should normally be produced by country authorities on a 12-month cycle and aligned with other domestic policy cycles. - Staff are required to prepare a JSAN for PRSPs and I-PRSPs and circulate it to the Executive Board generally within four months of transmission of the PRSP and I-PRSP. - For APRs, it is good practice to provide feedback in the context of an AFP; in case of significant weaknesses in the PRS, program staff reports should report how these weaknesses are being addressed. ### Social and priority spending - Social and other priority spending should be safeguarded and, whenever appropriate, increased under SCF-supported programs. - Monitoring of social and other priority spending should be through explicit program targets, typically an indicative floor on social and other priority spending, whenever possible. - The definition of social or other priority spending should be consistent with the authorities’ poverty reduction and growth objectives. - If tracking of such expenditures is not feasible, program documentation should report which measures are envisaged to develop an adequate tracking system. - Staff should monitor progress in establishing tracking systems; the program may include relevant structural benchmarks if appropriate. ### Debt sustainability analysis (DSA) - SCF-supported programs should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks; country teams should engage authorities in preparation, discuss results, and share final files with relevant officials. - DSAs for most LICs are usually prepared jointly with the World Bank; country teams should also involve other relevant MDBs. - Joint DSAs are required for PRGT-eligible IDA-only countries; for LICs that are not IDA-only, close consultation with the Bank is recommended. - A fully elaborated DSA is required at least once every three years, with shorter annual updates in interim years possible in the absence of significant changes in the macroeconomic and financial environment. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - The timing of a DSA may be driven by program requirements; design of debt limits under an SCF arrangement is systematically related to assessment of debt vulnerabilities (see Appendix II). - A DSA (or DSA update) may be needed for higher access financing requests (augmentation or new arrangement). - If a DSA is required outside the regular joint Bank-Fund DSA cycle, a DSA update may be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA provided a joint DSA was prepared recently and the analysis would not change the risk of debt distress rating. - DSAs for LICs should be presented as self-contained documents (see Appendix I) and should normally be prepared using the LIC Debt Sustainability Framework (DSF); for countries with durable and substantial access to market financing, the template for middle-income countries can be used instead. - The analysis includes three components: - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit assessment of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions in the country; - Recommendations on a borrowing (and lending) strategy to limit the risk of debt distress, while maximizing the resource envelope to achieve the country’s development objectives. ### Collaboration with the World Bank and other development partners - Fund staff should consult closely with all major development partners active in the country when designing and monitoring an SCF-supported program. - The JMAP approved by the Boards of the World Bank and IMF calls on Bank and Fund country teams to consult with each other at least once a year to identify the country's key macroeconomic and structural reform challenges and coordinate work plans. ### Conditionality principles - Conditionality under an SCF arrangement is intended to ensure Fund resources are provided in support of meeting program objectives, with adequate safeguards to the Fund’s resources. - Consistent with the Fund’s Guidelines on Conditionality, conditions will normally consist of macroeconomic variables and structural measures reasonably within the member’s direct or indirect control and that are generally either: - (i) of critical importance for achieving program goals or for monitoring program implementation, or - (ii) necessary for the implementation of specific provisions of the IMF Articles of Agreement or policies adopted under them. - Where conditions are outside the Fund’s core expertise, a more detailed explanation of their critical importance is required. - SCF-supported programs must meet the UCT conditionality standard, which requires the commitment and capacity by the authorities to implement a set of policies adequate to correct external imbalances and enable repayment to the Fund. - The appropriate adjustment path is determined based on the country’s circumstances, objectives, policy constraints, and severity of balance of payments needs. - The adjustment effort required to attain full sustainability would not be expected to extend much beyond the expiration date of the SCF arrangement, and would often fall fully within the arrangement period. - Conditionality should be limited to policies critical to achieving the part of the overall adjustment process covered by the arrangement; the SCF will generally permit less flexibility than the ECF in timing of these measures. ### Specification of program conditions - Program conditionality will include quantitative periodic and continuous PCs, typically quantitative and structural benchmarks, and prior actions if necessary. - Conditionality is set at time of approval of the arrangement and updated at program reviews; conditionality should normally be set (or modified) by the Board before the test date. - For establishment (or modification) of post-dated PCs, program documents must be signed and circulated to the Board along with the staff report before the test date; no information on implementation of such conditionality will be available at the time of the Board meeting. - Prior actions are measures expected before Fund approval of an SCF arrangement, completion of a review, or granting of a waiver with respect to a PC when critical for successful implementation; prior actions are to be applied parsimoniously, specified in clear, objective, and unambiguous terms, and should in principle be implemented at least five working days before the Board discussion. - Prior actions should be defined in the LOI/MEFP and cross-referenced in the relevant Board Decision. - Quantitative PCs would normally be set on a semi-annual basis and tied to semi-annual program reviews; quantitative benchmarks (indicative targets) would normally be specified on a quarterly basis. - Where closer monitoring or more flexibility is needed, quantitative PCs and reviews could be scheduled no more than six months apart and each review must be associated with a set of performance criteria and a disbursement. - Conditionality should cover the 12 months following the Board meeting (initial approval or review). - Under semiannual monitoring, PCs would normally be established for two future test dates at the time of approval and at each review (except penultimate and final reviews). - Under quarterly monitoring, PCs should normally be set for four future test dates, and in any case not less than for two future test dates. - Quantitative periodic PCs typically include measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, and any other macro-critical indicators; in most cases there is also a limit on nonconcessional external debt, which could be set as a periodic or continuous PC. - PCs are usually subject to program adjustors that reflect deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible and may include other indicators such as reserve money. - Continuous PCs always include, inter alia, commitments related to non-introduction or intensification of certain exchange restrictions and on non-introduction or modification of multiple currency practices; other continuous PCs typically include the non-accumulation of external payments arrears and may include the non-contracting of nonconcessional external debt. - SCF arrangements should cover structural reforms deemed critical for achieving a stable and sustainable macroeconomic position in the short term. - Structural benchmarks are critical measures intended as clear markers for progress on critical structural reforms in program reviews; structural benchmarks should be used parsimoniously and macro-criticality explicitly justified in program documents. - Specific objectives should be defined for periods covered by individual reviews with related structural benchmarks critical for achieving program objectives. - The appropriate number of structural benchmarks depends on country-specific factors; SCF arrangements would typically contain less than 5 structural benchmarks per semiannual review. - The use of structural PCs was discontinued in 2009. - Any structural benchmark significantly delayed can be re-dated and re-linked to the next program review if it remains macro-critical; if implementing a structural benchmark is no longer possible as defined, a new or modified benchmark may be appropriate so long as it is critical to achieve program goals. ### Waivers and modifications - A waiver for non-observance of a PC may be granted if the Fund is satisfied the program will nevertheless be successfully implemented because of minor or temporary nature of the nonobservance or remedial actions taken by the authorities. - Upon verification that a PC was not met, a request for a waiver can be made by the member in the LOI; if staff supports the waiver, justification will be provided in the staff report including a proposed decision on the waiver. - Waivers for nonobservance are only required for quantitative PCs tied to the specific disbursement and to the review being completed (and for any standard continuous PC that has been missed). - Waivers for PCs tied to subsequent disbursements and reviews are not required even if information on nonobservance already exists; staff report and LOI/MEFP must provide assurances that understandings on appropriate policies have been reached to complete the subsequent review, though relevant PCs will need to be waived when that review is concluded. - Waivers of applicability could in principle be granted if information necessary to assess observance of a PC is unavailable but the Fund is satisfied the program will be successfully implemented and there is no clear evidence the PC has not been met; in the case of the SCF, waivers of applicability would be highly unusual. - Unlike purchases under the SBA, each SCF disbursement is linked to specific PC test dates and a specific review so the disbursement is not blocked when a new test date passes and information on performance is unavailable because that test date is linked to a future disbursement and review. - A waiver of applicability for a PC at a test date linked to the current review could raise serious questions about the country’s capacity to provide timely data. - In arrangements with blended financing, waivers of applicability will be required for the GRA-financed arrangement if the review is being conducted after the most recent test date has passed and data are not yet available. - With respect to the GRA financial arrangement, the member may purchase any amount available based on earlier completed reviews if the purchase is requested within 45 days of the most recent test date and all conditions specified in paragraph 2 of the Reduction of Blackout Periods in GRA arrangements decision (Decision No. 14407-(09/105)) are met. - Modifications to program conditionality set by the Board may be appropriate when departures from PCs are expected, for instance when basic program assumptions have not been realized or significant unanticipated developments have occurred, provided targets remain macro-critical. - Requests for modifications must be submitted to the Board before the relevant test date has been passed and approved by the Board before information on observance of the PC is available, normally in the context of a program review. - In exceptional cases, modifications can be approved by the Board outside a program review if authorities and staff have common understandings on appropriate policies through the next review, documented in a revised or new LOI with an updated PC table and, where relevant, TMU. - Board approval outside the review context requires a staff report discussing reasons for the modification, why it is proposed outside the review context, status of the program, and relevant policy understandings. *Source: _082714 - 137. SCF-supported programs should be aligned with the country’s own poverty reduction and* ### 155. Misreporting occurs when members with a Fund-supported program obtain resources on ### _082714 - 155. Misreporting occurs when members with a Fund-supported program obtain resources on ### Misreporting and noncomplying disbursements - Misreporting occurs when members with a Fund-supported program obtain resources on the basis of inaccurate information regarding observance of quantitative or continuous PCs or prior actions (a “noncomplying disbursement”). - Under the SCF arrangement, a noncomplying disbursement occurs when: - (i) the Fund makes a disbursement on the basis of a finding that applicable conditions established for that disbursement (which include the accuracy of the information on PCs for which waivers have been requested) have been observed; and - (ii) that finding later proves to be incorrect. - Procedures upon evidence of a possible noncomplying disbursement: - The Managing Director shall inform the member promptly. - After consultation with the member, if the Managing Director determines that the member did receive a noncomplying disbursement, the Managing Director shall promptly notify the member and submit a report to the Executive Board with recommendations. - The Board may decide either: - (a) that the member shall be expected to repurchase/repay the disbursed amount, or - (b) that the nonobservance will be waived. - Waivers will normally be granted only when: - the deviation from the relevant PC or other condition was minor or temporary, or - the member had adopted additional measures appropriate to achieve the objectives supported by the relevant decision on the disbursement. - De minimis misreporting: - Whenever the Executive Board finds that the noncomplying disbursement has been made but that the nonobservance of the relevant PC or other specified condition was also de minimis misreporting; i.e., when a deviation from a PC would be so small as to be trivial with no impact on the assessment of performance under the relevant member’s program, a waiver for nonobservance shall be granted by the Executive Board. - De minimis misreporting will not be published in a staff report. ### Reviews and disbursements — purpose and assessment - Purpose of program reviews: - Program reviews evaluate whether the program is on track to achieve its objectives based on: - a backward-looking assessment—taking into account performance against quantitative PCs, structural and quantitative benchmarks, and prior actions; and - a forward-looking assessment of the prospects for successful program implementation, in particular whether policy capacity and commitments are adequate to achieve the program’s objectives. - At the time of the consideration of the final review under an SCF arrangement, and assuming no further program support from the Fund is expected, the scope of the forward-looking assessment could be more limited than for previous reviews. - Reviews update program design, specify forward-looking policies and conditionality, and are the main vehicle for modifications to program design (changes in access, phasing, and conditionality). - Documentation: - At the time of approval and for each review, the authorities’ LOI presents or updates their policy program, and a staff report provides an overall assessment of performance and policy commitments. ### Timing of reviews, test dates, and disbursements - The timing of all reviews, test dates, and disbursements is summarized in a staff report table at approval and updated as needed at reviews. - Arrangement text for the initial SCF request specifies test dates, reviews, availability dates, and disbursements for the first year. - The quantitative indicator table (“PC table”) attached to the LOI/MEFP should clearly identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date of program approval or review. - The structural benchmark table should cover measures over at least a 12-month period, clearly indicating the reviews that individual benchmarks are linked to. - The Decision attached to the staff report should specify all PCs and review/availability dates normally over the next 12 months from the Board date of program approval/review. - Disbursement sequencing: - The first disbursement is made available upon approval of the arrangement. - Subsequent disbursements will be conditional on observance of PCs and a program review that confirms satisfactory progress and adequate safeguards. ### Frequency, test dates, and availability - Disbursements and reviews under an SCF arrangement are expected to normally be semiannual, or quarterly where closer monitoring is needed. - Flexibility: - Test dates and review dates should be scheduled no more than six months apart. - Possible to shift between semiannual reviews and higher frequencies during an arrangement or at approval based on projected risk profile. - Test date and availability date constraints: - Test dates for PCs must be set such that all scheduled disbursements can take place before the end of the SCF arrangement, taking into account reporting lags and staff report preparation/circulation periods. - Availability dates for disbursements should be set so all data needed to confirm observance of PCs at the related test dates would have become available. - Availability dates are specified in the Arrangement text and subsequent Decisions and are summarized in the staff report table. - Reviews cannot be completed prior to the applicable availability date. ### Program period and blackout periods - Program period timing: - The program period supported by an SCF arrangement would typically start somewhat before the Board approves the SCF arrangement, and three to six months before the first test date under semi-annual monitoring. - The program period should normally not start more than three months prior to the Board meeting, and in any case not before the authorities and staff have discussed the parameters of the program. - Blackout periods: - In contrast to SBAs, the design of an SCF arrangement typically avoids “blackout periods” because each disbursement is linked to completion of a specific review and observance of specific periodic performance criteria. - A disbursement is not blocked when a new test date passes because such new test date applies to a future disbursement subject to completion of a future scheduled review. - However, previously approved disbursements may still be blocked once a scheduled review date has passed (or if a continuous PC has not been met). ### Addressing interruptions: track records, combined reviews, and rephasing - Interruptions and delays: - If interruptions are caused by substantial policy slippages, it is often appropriate to establish a track record before completing the review. - A track record could be: - informal (based on informally agreed time-bound policy actions and targets), - monitored more formally under an SMP, or - in case of urgent financing needs caused by an exogenous shock, the RCF (assuming applicable policy commitments are in place). - Modifications to timing: - Bringing the program back on track may require modification to the planned timing of disbursements and reviews. - Delays and interruptions can sometimes be addressed through extensions of the arrangement, combining reviews, rephasing of access, or combinations of these measures. - Combining reviews: - Two reviews can be combined when delays have occurred and performance can be assessed against two test dates linked to successive reviews. - Combining three or more reviews would be very unusual. - Combining reviews is only possible if: - (i) conditionality has been fully defined, including applicable PCs, and approved by the Board; - (ii) data are available for measuring observance of conditionality for the reviews; and - (iii) the anticipated dates for conclusion of the reviews in the text of the arrangement have all passed. - Typical use-case: reviews are combined when the program is on track with respect to the most recent review and sufficient corrective action offsets earlier problems. - Combining is inappropriate where slippages relative to the most recent review are significant; in such cases cancellation and discussion of support under a new instrument may be appropriate. - Alternatively, if earlier review performance was broadly satisfactory (or slippage addressed), the past review could be completed while establishing a new future test date and conditionality, typically combined with rephasing of access. - Rephasing access: - Disbursements may be rephased to change amounts under individual disbursements and/or change number or timing of disbursements and reviews. - If delays cannot be accommodated by extensions or combining reviews alone, total amount of access can be rephased into a new pattern of test dates and reviews, generally only after making full use of the maximum possible extension. - Access should never be rephased in a manner that would make it impossible for the member to get the full, undisbursed amount under the arrangement. - If rephasing would compress a very large amount of access into a short period (even with potential extension), it would normally be appropriate to let the current arrangement expire, or have the member cancel it, and proceed to a new SCF arrangement with more attainable goals, unless there has been a very sharp turnaround in performance. ### Other relevant policies linked to SCF arrangements - EPAs: - Access to resources under SCF arrangements counts toward the policy on LTPE, except if the arrangement was treated in its entirety as precautionary and no disbursements were made. - Members that have had a UCT arrangement in place for at least seven out of the past ten years, and for whom an EPA has not been prepared in the past five years, an EPA should be prepared in time to be considered by the Board prior to a request for a new arrangement. - PPM: - Outstanding SCF credit will be subject to PPM. - Normally, members with outstanding credit from the Fund in the GRA and/or PRGT exceeding 200 percent of quota after the expiry of their arrangements are expected, upon the recommendation of the Managing Director, to engage with the Fund in PPM of their economic developments and policies (unless the member is implementing a Fund-supported program or SMP). - Article IV cycle: - The 24-month cycle for Article IV consultations applies to members with an SCF arrangement. - Specifically, Article IV consultations with members that have an on-track SCF arrangement in place would be expected to be completed within 24 months after the completion of the previous Article IV consultation. - If a program review is not completed by the date for completion specified in the arrangement, the next Article IV consultation would be expected to be completed by the later of: - (i) six months after the scheduled review date; and - (ii) 12 months, plus a grace period of three months after the previous Article IV consultation, - unless the program review has been completed prior to the later of these two dates, in which case the 24-month cycle continues to apply. - A member that has completed an SCF by drawing all amounts may remain on the 24-month cycle, if it does not meet any of the criteria in paragraph 2 of Decision No. 14747-(10/96): (i) the member is of systemic or regional importance; (ii) the member is perceived to be at risk, or is facing pressing policy issues of broad interest to the Fund membership; or (iii) the member has outstanding Fund credit exceeding 200 percent of quota. - At the time of the final review under the arrangement, staff should assess whether the consultation cycle should be shortened back to 12 months, based on the criteria mentioned above; if so, the staff report for the final review should seek the Board’s approval of such shortening. - Where the arrangement is cancelled by the member or expires with undrawn amounts, the member will remain on the existing cycle unless the Executive Board determines otherwise based on the above criteria. - Exchange system obligations and data provision: - Requirements under Article VIII Sections 2, 3, 4, and Article XIV are discussed elsewhere. - A standard continuous PC applies, inter alia, to the non-introduction or intensification of exchange restrictions and on the non-introduction or modification of multiple currency practices (see Appendix II, Section G). - Article VIII, Section 5 of the Fund’s Articles of Agreement does not apply to the provision of information that is required for the purposes of Fund financial assistance under the SCF. - HIPC and MDRI: - Performance under an SCF arrangement can count toward a track record of strong policy performance under Fund-supported programs required for the HIPC decision point and completion point. - The minimum required track record for the decision point is six months and one year for the completion point. - Side letters: - The use of side letters in LIC programs has been extremely rare. - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine the authorities’ efforts to prepare the domestic groundwork for a measure. *Source: STANDBY CREDIT FACILITY (selected excerpts).* ### CHAPTER III—RAPID CREDIT FACILITY ### CHAPTER III—RAPID CREDIT FACILITY ### A. Objectives and Qualification - Purpose and objective: - The RCF provides rapid concessional financial assistance as outright disbursements to LICs facing urgent balance of payments needs, including needs caused by exogenous shocks, natural disasters, and emergence from conflict, as well as domestic instability, emergencies, and fragility. - Designed for situations where a multi-year UCT-quality Fund-supported program is either not necessary or not feasible (e.g., limited capacity, post-conflict, disaster, or fragile situations, or when more time is needed to design a multiyear program). - Repeated use of the RCF may be warranted under certain circumstances and subject to limitations under the legal framework of the PRGT Instrument. - Objective: meet urgent balance of payments needs and assist countries in implementing policies to move toward or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - RCF support aims to: replenish international reserves, loosen financing constraints for public and private sectors, provide policy support, and catalyze additional financing from donors. - Eligibility and qualification: - Assistance available to PRGT-eligible member countries that face urgent balance of payments needs unless: - (i) difficulties are predominantly caused by a withdrawal in financial support by donors; or - (ii) a UCT-quality program is both feasible and necessary. - Definitions and conditions: - An urgent balance of payments need is characterized by a present balance of payments need that, if not addressed, would result in immediate and severe economic disruption. - The RCF can be used only if a UCT-quality Fund-supported program is either not feasible or not necessary: - A member would normally qualify for the RCF if either: - (i) the balance of payments need is expected to be resolved within one year and no major policy adjustments are necessary; or - (ii) a UCT-quality program cannot be put in place owing to limited policy implementation capacity or when urgency calls for assistance before a UCT-quality program can be put in place. - Qualification requires ex ante policy undertakings, typically outlined in a LOI, including commitments not to introduce or intensify exchange and trade restrictions and sufficient policy capacity and commitment to implement policies to safeguard Fund resources. - Definitions referenced: - A balance of payments need can be present, prospective, or potential; an urgent need is by definition present. - A protracted balance of payments problem: resolution of macroeconomic imbalances expected to extend over normally three years or more. ### B. Repeated Use - Modality: - RCF resources are provided as outright loan disbursements and are not phased under an arrangement. - Can accommodate one-off disbursements or repeated disbursements over a limited period for recurring or ongoing urgent financing needs. - Typically used to facilitate transition to a UCT-quality program (normally under the ECF) or, in post-conflict/instability situations, analogous to RFI/EPCA use. - Limitations to prevent moral hazard and weak policies: - A member may not receive more than two RCF disbursements in any 12-month period. - A member can qualify for an RCF disbursement only if one or more of the following apply: - no RCF disbursements have been made in the past three years; or - the balance of payments need was caused primarily by a sudden, exogenous shock (qualifies under a “shocks window”); or - the member country has established a track record of adequate macroeconomic policies for a period of about six months prior to the request. ### C. Concurrent Use and Blending - Concurrent use: - A member cannot obtain RCF financing if a UCT-quality financial arrangement (e.g., under the ECF or SCF) is in place and on track. - RCF financing during an ECF or SCF arrangement can be provided only when: - (i) disbursements under the ECF or SCF arrangement are not possible (e.g., due to policy slippages or delays); and - (ii) RCF qualification requirements are met, including an urgent balance of payments need and relevant policy commitments; and - (iii) the balance of payments need giving rise to the RCF request is primarily caused by a sudden exogenous shock. - When access under the RCF exceeds 25 percent of quota in these circumstances, existing and prospective policies should be sufficiently strong to address the shock. - The RCF can be used concurrently with GRA financing under certain circumstances. - Use with PSI or SMP: - RCF can be combined with programs supported under the PSI or monitored under an SMP. - Satisfactory performance under a PSI or SMP for at least six months would normally satisfy the track record requirement for repeated use of the RCF. - A short LOI and a short staff paper would normally suffice for requesting an RCF disbursement during an on-track PSI or SMP. - Blending (RCF + GRA): - Certain PRGT-eligible countries are expected to receive blended PRGT and GRA resources rather than fully concessional financing. - Blending presumptions and limitations: - Blending is presumed for PRGT-eligible countries with either: - (i) per capita income above the prevailing operational cutoff used by the IDA; or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. - The income presumption applies at the time of each RCF disbursement. - If no available GRA instrument exists for blending (e.g., when RFI purchases cannot be used), RCF-only financing is possible irrespective of the presumption of blending. - Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC DSA), even if income or market access presumption suggests 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. - Operational notes: - When blended, RCF resources will normally be provided together with GRA resources under the RFI. - Modalities and documentation of blended RCF-GRA financing are broadly the same as standalone RCF, but average concessionality will be lower. - RFI qualification requirements must be met when applicable. - Numeric presumption detail: - As of July 2014, the IDA operational cutoff was US$1,215. - A member is presumed to have had past market access if it tapped international financial markets during at least two of the last five years, with total access over the five years amounting to a minimum of 50 percent of quota. ### D. Access - Determination of access—main criteria: - Access is determined case-by-case based on: - (i) the member’s (present) balance of payments need (taking into account all balance of payments flows, including reserve accumulation and financing from other sources); - (ii) the strength of its policies and capacity to repay the Fund (policy plans, adjustment effort, commitment, institutional capacity, track record, vulnerabilities, imbalances, and debt sustainability); and - (iii) the amount of outstanding Fund credit and the member’s record of past use. - Individual RCF disbursements may not exceed the member’s present balance of payments need and would typically be less than total financing needs, as RCF support is expected to catalyze financing from donors and creditors. - Members requesting disbursements generally make a representation, normally in an LOI, that they are experiencing an urgent balance of payments need. - For repeated disbursements: - Timing and amounts need not mirror projected financing needs. - Given limits on number of disbursements and sub-ceilings on access, disbursements often cover only a small part of total financing needs, with remainder mobilized from other development partners. - When urgent financing needs persist and transition to a UCT-quality arrangement is not expected in the near term, access may be set so successive disbursements at semiannual intervals and roughly equal magnitudes could be accommodated under applicable RCF access sub-ceilings. - Access limits (numeric): - Total access under all concessional facilities is subject to global annual and cumulative limits, including ECF, SCF, RCF, and ESF. - Total access to financing under the PRGT should normally not exceed 100 percent of quota per year across all concessional facilities. This annual access limit refers to past and future scheduled disbursements in any 12-month period, specifically: - (i) any actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available (i.e., the date of the Board decision that makes the disbursement available); - (ii) any disbursements to date that became available under the current ECF or SCF arrangement, as relevant, irrespective of whether they have been drawn or not; and - (iii) any future disbursements under the current ECF or SCF arrangement, as relevant, at the scheduled availability dates. - Total access to financing under the PRGT should normally not exceed 300 percent of quota cumulatively, net of scheduled repayments. Specifically, total outstanding Fund concessional credit (including disbursements made available but not drawn in the context of the current arrangement) cannot normally exceed 300 percent of quota at any point in time, based on projected disbursements and repayments. *Source: _082714 - CHAPTER III—RAPID CREDIT FACILITY* ### 187. In exceptional circumstances, access above the normal global limits can be made available ### In exceptional circumstances, access above the normal global limits can be made available ### Exceptional access: criteria and hard caps - Exceptional access may be provided to countries that: - (i) experience an exceptionally large balance of payments need that cannot be met within the normal limits (e.g., very large external shocks, very low levels of reserves), - (ii) have a comparatively strong adjustment program and ability to repay the Fund—this criterion would generally not be met for countries with a high risk of debt distress or those that are in debt distress as defined under the joint Bank-Fund DSA, unless expected debt relief or restructuring is projected to reduce the risk of debt distress to a moderate level or low level, and - (iii) do not meet the income or market access criteria for blending (see above). - Exceptional access is subject to hard caps of 150 percent of quota annually and 450 percent of quota on a cumulative basis across all concessional facilities. ### RCF-specific sub-ceilings and shocks window - Standard RCF sub-ceilings: - 25 percent of quota per year (i.e., over any 12-month period) - 100 percent of quota on a cumulative basis (i.e., total stock of RCF credit outstanding at any point in time) - Shocks window (conditions to exceed sub-ceilings): - Augmented access up to 50 percent of quota per year and up to 125 percent on a cumulative basis may be available provided: - (i) the primary cause of the balance of payments need is a sudden exogenous shock other than a withdrawal in financial assistance by donors, and - (ii) existing and prospective policies are sufficiently strong to address the shock. - The exogenous shock concept includes both economic (e.g., terms of trade) and non-economic shocks (e.g., natural disasters) that are sudden and not related to members’ policies. - The amount of augmented access under the shocks window cannot exceed the size of the financing need created by the exogenous shock. ### Norms, typical disbursements, and blended access - There are no norms for access under the RCF; the sub-ceilings should not be considered norms. - Individual disbursements would in most cases be below the applicable annual sub-ceilings: - A disbursement of 50 percent of quota under the shocks window would be expected only where the financing need is very large and the economic policy context is relatively strong (including limited debt vulnerabilities). - In the absence of an exogenous shock, a disbursement of 25 percent of quota would be rare and only appropriate where the financing need is relatively large and the economic policy context strong enough to provide a realistic near-term prospect of a transition to a UCT-quality program. - When RCF disbursements are blended with concurrent GRA disbursements: - Total access to financial assistance (e.g., RCF together with RFI) is determined based on the standard criteria, implying comparability across countries with similar needs, policies, and outstanding Fund credit. - Access to the concessional (RCF) component of blended assistance would normally be half of total access, with access to concessional resources capped at the annual access limit; the remainder of total access would be met by GRA financing. ### Procedural safeguards on high access requests - Debt Sustainability Analysis (DSA) requirements: - A DSA or DSA update is required for any financing request under the PRGT if it: - (i) involves exceptional access to concessional resources; or - (ii) brings total access, i.e., cumulative disbursements, under all concessional facilities to more than 80 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period (including (a) actual disbursements under the RCF, ESF, and past ECF and SCF arrangements at the time they became available, (b) any disbursements to date that became available under an existing ECF or SCF arrangement, irrespective of whether they have been drawn or not, and (c) any future scheduled disbursements under an existing ECF or SCF arrangement); or - (iii) involves a member country with a high risk of debt distress or in debt distress. - A DSA update can be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA as long as a joint DSA was prepared recently and the analysis would not result in a change of the risk of debt distress rating. - Early informal Board meeting requirement: - Required if a financing request under the PRGT would: - (i) involve exceptional access to concessional financing; or - (ii) bring total access, i.e., cumulative disbursements, under all concessional facilities to more than 180 percent of quota, based on cumulative past scheduled and future scheduled disbursements in any 36-month period (with the same components (a), (b), and (c) as above). - Information to the Board typically in a 2–3 page note including: - (i) factors underlying the large balance of payments need, taking into account financing from donors, - (ii) brief summary of needed main policy measures and macroeconomic framework, - (iii) expected strength of the program and capacity to repay the Fund, - (iv) analysis of debt vulnerabilities, reflecting all projected debt financing, including from the Fund, - (v) reference to the impact on the Fund’s concessional resources, - (vi) likely timetable of discussion with the authorities, and - (vii) a selected indicators table and, if possible, the standard DSA charts. - The meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Additional safeguards: - Staff to provide early notice to the Board of upcoming requests where envisaged financing would have a large impact on the Fund’s overall concessional resources. - New financing requests of 10 percent or less of quota do not trigger either the need for a DSA update or a Board briefing. ### Financing terms - Repayment schedule for RCF credit: - Repayments made in 10 equal semiannual installments, - Subject to a 5.5-year grace period from the date of the first disbursement, - 10-year final maturity. - Authorities may make early repayments at any time, but would not be expected to do so. - Interest rate: - Interest is paid semiannually. - The interest rate on RCF credit is currently set at zero percent, but subject to biennial Board reviews that take account of developments in world interest rates. - At each review, interest rates would normally be adjusted if warranted by the prevailing SDR rate, within a 0.0–0.5 percent range for the RCF. - The new interest rate would apply to all outstanding RCF credit. - The next such review is scheduled by end-December 2014. ### Financing assurances, arrears, and safeguards - Financing assurances: - The Fund’s policy on financing assurances requires that financial arrangements can only be approved (and reviews completed) when the program is fully financed. - Financing assurances are not required for RCF disbursements, but staff reports for RCF requests should provide information on projected financing gaps and discuss prospects for financing assurances if building toward a UCT-quality arrangement. - Assurances should be given that the member has the capacity to repay the Fund based on medium-term projections and the standardized table on indicators of capacity to repay the Fund. - Arrears policy: - The Fund’s policy of non-toleration of sovereign arrears to official creditors generally applies in the context of RCF support; the Fund generally calls for resolution of existing arrears to official creditors and non-accumulation of new arrears. - Existing arrears need not necessarily be settled immediately and can be addressed in various ways depending on creditor type; country teams should seek guidance from LEG and SPR. - Macroeconomic assumptions underlying RCF-supported policies should be consistent with expectations regarding resolution of existing arrears to official creditors. - Flexibility can be practiced (as with EPCA and ENDA, and RFI) to allow RCF disbursements without understandings on clearance of sovereign arrears, especially after conflict or natural catastrophe when concerted international action is expected to normalize relations with official creditors. - Staff reports should provide detailed information on arrears and prospects for resolution. - Lending into arrears (LIA) policy and flexibility: - The Fund can lend in situations of sovereign arrears to private external creditors only where: - (i) prompt Fund support is essential for successful implementation of the member’s adjustment program, and - (ii) the member is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with creditors (or facilitate such an agreement) and good prospects exist for removal of exchange controls. - For the RCF, these conditions may not be required in all cases (e.g., in the wake of conflict or natural catastrophe), though staff reports should provide information on arrears to private external creditors. - Overdue obligations to the Fund: - If a member is in arrears to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or to the Fund as Trustee (including the PRGT), a request for IMF financing, including under the RCF, will not be approved and disbursements under an existing arrangement will be suspended until the arrears are cleared. - After one month the Managing Director will notify the Executive Board that an obligation is overdue; for protracted arrears (more than six months’ duration), semiannual reports are issued to the Executive Board. - The Managing Director may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance and, under certain circumstances, SMPs. - Remedial measures for PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation and suspension of technical assistance. - Safeguards assessments: - RCF assistance requires a commitment to undergo a safeguards assessment and to provide Fund staff access to the central bank’s most recently completed external audit reports; the member shall authorize its external auditors to hold discussions with staff at the time of the formal written request for RCF resources. - Timing and modalities determined case-by-case; the safeguards assessment is presumed to be completed before Board approval of any subsequent arrangement to which the Fund’s safeguards policy applies. - The safeguards process involves analysis of documents and discussions with authorities and auditors, evaluating governance, auditing, financial reporting, control systems, and legal autonomy of the central bank. - FIN must coordinate closely with other departments; area departments should keep FIN informed of safeguards issues and logistical timing. ### Policy objectives and program design under RCF support - General objective: - RCF-supported policies should not compound existing balance of payments difficulties and should generally aim to make progress toward achieving or restoring a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Policy goals and areas to be addressed (to the extent possible and consistent with country context): - (i) strong and durable poverty reduction and growth, - (ii) low or moderate inflation, - (iii) sustainable fiscal and current account balances, - (iv) limited debt vulnerabilities, - (v) adequate international reserves, and - (vi) sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Alignment and documentation: - RCF-supported policies should, to the extent possible, be aligned with the country’s poverty reduction and growth objectives. - The LOI and staff report for an RCF request should discuss the current situation, the cause of the urgent balance of payments need, macroeconomic prospects, and clearly articulate near-term RCF-supported policies consistent with medium- and longer-term policy objectives. - Typical policy elements in program design: - Fiscal policies: fiscal stance anchored for macroeconomic stability and fiscal/debt sustainability; revenue and spending policies that consider growth and social objectives; budgets guided by medium-term fiscal frameworks insofar as possible. - Monetary policies: consistency with inflation, exchange rate, and reserve objectives, accounting for cyclical considerations. - Exchange rate policies: unified exchange rate and a real exchange rate broadly in line with fundamentals to ensure a stable and sustainable external position consistent with adequate growth. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: ensuring resources are tracked, reported, and targeted appropriately (including adequate resources for social and other priority spending); public debt management to support debt sustainability; revenue reforms to broaden the revenue base and enhance tax efficiencies. - Other structural reforms critical for achieving the member’s macroeconomic objectives. *International Monetary Fund — Rapid Credit Facility (excerpts)._ ### 204. The balance of payments support through the RCF can assist countries in smoothing the ### _082714 - 204. The balance of payments support through the RCF can assist countries in smoothing the ### Purpose and macroeconomic effects of RCF balance of payments support - The Fund’s financial support can be used to replenish international reserves and provide liquidity for external payments. - By relaxing external financing constraints, the Fund’s balance of payments support loosens domestic liquidity constraints for both the public and private sector, reducing the need for retrenchment in public and private savings-investment balances and thus: - Enhancing policy options (allowing less contractionary fiscal, monetary, and exchange rate policies). - Cushioning private sector adjustment (e.g., investment and import declines). - The appropriate mix of financing and public/private adjustment is determined on a case-by-case basis. - Consistent with the Fund’s unique role in LICs: - The Fund can provide moderate levels of liquidity support to help address macroeconomic imbalances, while the bulk of financial assistance is normally expected to come from donors. - Fund financial support is concessional and provides inter-temporal smoothing of adjustment rather than a permanent resource transfer. - Fund lending to LICs is generally expected to catalyze donor support, leveraging the Fund’s scarce subsidy resources. ### Use of RCF resources for budget financing (domestic counterpart) - A member may use the domestic counterpart of resources received under an RCF to finance, directly or indirectly, the budget deficit of the government, consistent with the Fund’s legal framework if the member has balance of payments problems and is implementing a program to resolve them. - Direct budget financing may be appropriate when: - (i) policies envisage that the entire amount of the Fund’s financial support is used to meet a present or prospective balance of payments need; - (ii) loosening fiscal financing constraints is an important macroeconomic objective under the policies; and - (iii) the central bank cannot or should not (for legal or institutional reasons) lend to the government while the domestic financial sector is too shallow (or not stable enough) to provide the necessary budget financing (or the central bank plays a largely passive domestic policy role, for instance under a currency board or in a fully dollarized economy). - Staff reports should justify the use of the domestic counterpart of RCF resources for budget financing where relevant and discuss safeguards implications. ### Links to poverty reduction strategies (PRS) and social spending - Any financing request under the RCF must be accompanied by a statement, normally in the LOI or MEFP, of how the RCF-supported policies advance the country’s poverty reduction and growth objectives—linkage may be indirect (e.g., through bolstering macroeconomic stability). - If a PRS document exists, the RCF-supported policies should take into account and generally be consistent with PRS objectives in the context of promoting a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - If no relevant PRS document exists, RCF documentation (e.g., in an attachment to the LOI or MEFP) should outline the country’s medium-term poverty reduction and growth objectives and policies; subsequent Board documents should refer to and update this documentation as necessary. - PRS documents are not required for RCF disbursements, but if a future ECF- or PSI-supported program is under consideration, staff should inform authorities early about PRS documentation definitions and timelines. - PRS documents should normally be produced by the country authorities on a 12-month cycle and aligned with other domestic policy cycles; staff must prepare a JSAN for PRSPs and I-PRSPs and circulate it to the Executive Board generally within four months of transmission. - Social and other priority spending should be safeguarded and, whenever appropriate, increased under RCF-supported policies. - Where LOI/MEFP includes indicative targets, these should include a floor on social and other priority spending, whenever possible. - The definition of social or other priority spending should be consistent with the authorities’ poverty reduction and growth objectives. - If tracking such expenditures is not feasible, the RCF documentation should report measures envisaged to develop an adequate tracking system; staff should monitor progress and the program may include relevant structural measures. ### Debt Sustainability Analysis (DSA) - RCF-supported policies should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks. - Country teams should engage with authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for most LICs are usually prepared jointly with the World Bank; country teams should also involve other relevant MDBs. - A fully elaborated DSA is required at least once every three years, with shorter annual updates in interim years possible in the absence of significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - A DSA (or DSA update) may be required for higher access financing requests. - In cases where a DSA is required outside the regular joint cycle, a DSA update may be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA, provided a joint DSA was prepared recently and the analysis would not change the risk of debt distress rating. - DSAs for LICs should be presented as self-contained documents and normally prepared using the LIC Debt Sustainability Framework (DSF); for countries with durable and substantial access to market financing, the middle-income template can be used. - DSA analysis components include: - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit assessment of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions; and - Recommendations on a borrowing (and lending) strategy to limit the risk of debt distress while maximizing the resource envelope to achieve development objectives. - Joint DSAs are required for PRGT-eligible IDA-only countries; for LICs that are not IDA-only, close consultation with the Bank is recommended. ### Collaboration with World Bank and development partners - Fund staff should consult closely with all major development partners active in the country when designing and monitoring RCF-supported policies. - The JMAP approved by the Boards of the World Bank and IMF calls on Bank and Fund country teams to consult with each other at least once a year to identify key macroeconomic and structural reform challenges and coordinate work plans. ### Conditionality principles, prior actions, and monitoring - Conditionality is intended to ensure Fund resources support the member’s policy objectives with adequate safeguards to Fund resources. - Conditions will normally consist of macroeconomic variables and structural measures reasonably within the member’s direct or indirect control and that are either (i) of critical importance for achieving program goals (or for monitoring implementation), or (ii) necessary for implementing IMF Articles of Agreement provisions or policies adopted under them. - If conditions are outside the Fund’s core expertise, a detailed explanation of their critical importance is required. - The RCF does not require a UCT-quality economic program, does not involve ex post conditionality (quantitative or continuous performance criteria), a time-bound arrangement, or formal program reviews. Instead, it provides outright disbursements based on ex-ante policy undertakings. - Prior actions: - Prior actions could be specified only in exceptional circumstances when it is critical that a measure be taken prior to assistance. - Prior actions should be implemented no later than five working days before the Board discussion and be defined in the LOI/MEFP and cross-referenced in the Board Decision. - Monitoring policies and track records: - RCF disbursements do not require understandings on a program of economic policies beyond general ex-ante policy undertakings, but the RCF can support general policy support, establish a track record of economic performance, and help monitor implementation of UCT-quality policies. - The RCF can be used where a temporary shock creates a balance of payments need expected to be resolved within one year without major policy adjustments; more substantial or prolonged needs should be addressed through a financial arrangement. - When supporting a track record of performance, the LOI/MEFP typically sets out agreed monitorable quantitative and structural indicators (indicative targets or benchmarks) with specific test dates and deadlines. - Indicative quantitative targets could include measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, nonconcessional external debt, social and other priority spending where possible, and other macro-critical indicators. - Continuous measures could include commitments related to non-introduction of certain exchange restrictions and multiple currency practices, and non-accumulation of external arrears. - Structural benchmarks should be used parsimoniously, be macro-critical, and their macro-criticality explicitly justified; they do not require a specific target date but should indicate an envisaged time frame. - Targets under the RCF do not have the status of performance criteria; waivers are not required if they are missed, and program adjustors would not be needed. ### Misreporting and noncomplying disbursements - Misreporting under the RCF can occur only with respect to misreporting of prior actions (if applicable), since there are no performance criteria. - A noncomplying disbursement arises when: - (i) the Fund makes a disbursement based on a finding that all prior actions for that disbursement have been observed, and - (ii) that finding later proves incorrect. - Upon evidence a member may have received a noncomplying disbursement, the Managing Director shall inform the member promptly; after consultation, if the Managing Director determines a noncomplying disbursement occurred, the Managing Director shall notify the member and submit a report to the Executive Board with recommendations. - The Board may decide: - (a) the member shall be expected to repurchase/repay the disbursed amount, or - (b) the nonobservance will be waived. - Waivers will normally be granted only when the deviation was minor or temporary, or if, subsequent to the disbursement, the member adopted additional measures appropriate to achieve the objectives supported by the disbursement decision. - Whenever the Executive Board finds a noncomplying disbursement was made but the nonobservance was de minimis misreporting, a waiver for nonobservance shall be granted by the Executive Board; de minimis misreporting will not be published in a staff report. *Source: _082714 - 204. The balance of payments support through the RCF can assist countries in smoothing the* ### 219. The RCF can be used to build a track record of policy performance to enable repeated ### _082714 - 219. The RCF can be used to build a track record of policy performance to enable repeated ### RCF track records and repeated disbursements - The RCF involves outright disbursements without formal program reviews; there is no pre-determined phasing of disbursements or test dates for indicative targets. - Track records typically include agreed monitorable quantitative and structural indicators (which could be called indicative targets or benchmarks). - Test dates for quantitative targets can be set on a monthly, quarterly, semi-annual, or annual basis, including combinations thereof. - Test dates should generally be set to provide useful information for assessing performance in advance of potential future Fund support through the RCF or a UCT-quality arrangement. - Appendix III contains a discussion of different types of track records (referenced in the source). ### Requirements for repeated RCF disbursements - A track record of adequate macroeconomic policies is required for an RCF disbursement when: - the member has already received RCF financing in the past three years, and - the member does not qualify under the shocks window. - Such a track record would normally cover at least six months immediately prior to the disbursement. - The staff report should provide an assessment of past policy performance against any previously specified policy objectives and targets. - Good practice: even when a subsequent disbursement is motivated by an exogenous shock (and a track record is not required), preparing a track record is recommended. - The track record period should start no earlier than the first time substantive policy discussions on near-term macroeconomic targets began between the country team and the authorities, and no later than the time ad referendum understandings were reached on such targets. - Approval of a repeated disbursement is based on a finding that the member’s overall policy performance was adequate, taking into consideration the severity of the economic situation and the member’s capacity. - Exceptional case: where no relevant pre-determined monitorable objectives exist at the time a repeated RCF disbursement is requested in response to an urgent financing need (for instance because of the passage of time since the last disbursement), the track record could be based on the Fund’s assessment that macroeconomic policies have been adequate at least over the most recent six-month period. ### Other relevant RCF-related policies and modalities - EPAs: Access to resources under the RCF does not count toward the policy on LTPE. - PPM: Outstanding RCF credit will be subject to PPM. - Normally, members with outstanding RCF credit in the GRA and/or PRGT exceeding 200 percent of quota after the expiry of their arrangements are expected, upon the recommendation of the Managing Director, to engage with the Fund in PPM of their economic developments and policies (unless the member is implementing a Fund-supported program or SMP). - Article IV cycle: RCF support does not alter the regular (typically 12-month) cycle for Article IV consultations. - Exchange System obligations under Articles VIII and XIV and Data Provision under Article VIII, Section 5: The Fund may require members to furnish it with such information as it deems necessary for its activities, including program monitoring. - HIPC and MDRI: A period of performance under a monitorable track record supported by the RCF can count toward a track record of strong policy performance required for the HIPC decision point. - The minimum required track record for the decision point is six months. - Side letters: Use in LIC programs has been extremely rare; may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine authorities’ efforts to prepare domestic groundwork for a measure. ### PSI objectives, qualification, and modality highlights (excerpts) - Purpose of the PSI: - The PSI is a non-financial instrument for low-income member countries designed to promote close policy dialogue, provide more frequent Fund assessments, and deliver clear signals through Board endorsement. - The PSI assists eligible members in implementing programs aimed at maintaining or consolidating macroeconomic stability and debt sustainability while deepening structural reforms. - Eligibility and qualification: - PSI is available to all members eligible for assistance from the PRGT and with a policy framework focused on consolidating macroeconomic stability and debt sustainability while deepening structural reforms. - Qualification requires the member not to have a present or prospective balance of payments need unless such a need is expected to be met from other (exceptional) financing sources. - Qualification requires the member not to require significant macroeconomic policy adjustments (including to address a protracted balance of payments problem), though structural reforms may be appropriate. - Board approval of a PSI requires a finding that the member is committed to implement its policy framework in the context of a program that meets UCT-conditionality standards and aims to maintain or consolidate a stable and sustainable macroeconomic position. - Assessment framework for PSI qualification: - Two groups of indicators: indicators of macroeconomic performance and of policy and institutional capacity. - Macroeconomic performance assessed using key indicators: GDP growth, inflation, reserve adequacy, fiscal and current account balances, and an indicator of debt sustainability. - Quality of policies and institutions measured using past program performance (last three years) — on the basis of conditionality met/not met, delayed and combined reviews, and implementation of structural reforms. - For countries without a recent Fund-supported program, assessment considers implementation of macroeconomic program and structural reform agenda as assessed in recent Article IV staff reports. - Minimum CPIA threshold score of 3.25 will be used to assess whether institutions are of sufficient quality to support continued good performance. - Countries with a significant decline in their CPIA score over the last three years will not normally be expected to meet standards for approval of a PSI. - Transition paths: - Countries not meeting PSI qualification requirements can build a track record for moving to a PSI through an SMP or, in case of urgent financing needs, the RCF (assuming applicable policy commitments are in place). - Duration and extensions of PSI: - Assistance under the PSI can be approved for an initial duration of one to four years, from the date of the Board decision approving the PSI, and may be later extended. - Requests for three-year PSIs have been the norm and are expected to remain the default length for medium-term PSIs at approval. - A PSI may be extended (including multiple times) subject to an overall maximum duration of five years. - After expiration, cancellation, or termination of a PSI, a successor PSI may be approved if qualification criteria are met; there is no limit on the number of successor PSIs that can be approved. - Extensions that involve establishment of additional test dates and reviews may be appropriate when: - more time is needed to implement envisaged policies or reforms; - unforeseen events warrant extended monitoring (this could include an exogenous shock requiring some policy action and possibly Fund financial support through the RCF or SCF); - more time is needed to design a successor medium-term program. *RAPID CREDIT FACILITY (excerpt).* ### 233. Extensions must be requested by the member and approved by the Board before the ### _082714 - 233. Extensions must be requested by the member and approved by the Board before the ### Extensions, short-term extensions, cancellation, and automatic termination - Extensions must be requested by the member and approved by the Board before the expiration of the PSI period. - Extensions that involve establishment of new test dates and reviews: - Normally approved by the Board on the basis of an LOI and in the context of a program review (where the conclusion of the review demonstrates that the program is on track). - In exceptional circumstances (e.g., when a severe natural disasters prevents conducting the final review in a timely manner), may be approved by the Board outside a scheduled program review provided: - The authorities and staff have understandings on appropriate policies to be implemented through the next review, documented by a letter from the authorities. - Board approval requires a staff report discussing reasons for the extension, why it is proposed outside the review context, the status of the program, and relevant policy understandings. - Short-term (technical) extensions that do not establish additional test dates or reviews: - Can be granted outside the context of a review for a short period (a few weeks or months). - Permitted provided authorities and staff have reached (or are expected to reach in the very near term) understandings on appropriate policies to complete the review. - Board approval generally via a very short staff paper with a decision proposed for lapse-of-time Board approval; staff paper must explain status of discussions, document preparation, and relevant policy understandings. - Cancellation: - A PSI may be cancelled by the authorities at any time (e.g., when financing or adjustment needs are expected to extend beyond the short term, authorities lack capacity or commitment to implement the program, program objectives or modalities have changed substantially, or authorities no longer seek Fund support). - Automatic termination of a PSI occurs upon: - (a) noncompletion of two consecutive PSI scheduled reviews (or, in case of concurrent use with the SCF, if no scheduled review is completed within 12 months of the completion of the last scheduled review); - (b) the relevant member incurring overdue financial obligations to the GRA or PRGT; - (c) approval of an ECF arrangement for that member. ### Concurrent use with other IMF instruments (SCF, RCF, ECF, SMP) - PSI cannot be used concurrently with an ECF arrangement. - Countries with an approved PSI can receive financial support under the SCF or RCF without canceling the PSI. - SCF qualification for countries with an on-track PSI: - Presumed for countries with an on-track PSI that experience a balance of payments need, provided relevant SCF qualification requirements are met. - The balance of payments need could be present, prospective, or potential. - PSI users can request concurrent precautionary SCF support in periods of increased uncertainty or risk. - An on-track PSI with the UCT-conditionality standard reduces time needed to design an SCF-supported program. - If the PSI-supported program is off track, SCF approval typically occurs only after appropriate corrective actions. - Modalities for concurrent PSI and SCF support: - Support an economic program based on a single set of program conditions, schedule of reviews, and other requirements mirroring stand-alone SCF or PSI arrangements. - Key differences: - SCF qualification requirements must be met at time of SCF approval, in particular existence of a present, prospective, or potential balance of payments need. - Use of the SCF is normally limited to 2.5 years out of any 5-year period, assessed on a rolling basis, with exceptions for precautionary SCF arrangements and SCF arrangements for which the Fund assesses the member does not have an actual BoP need. - Choice of SCF duration (between 12 and 24 months) depends on length of financing and adjustment needs and is not necessarily tied to the PSI period. - If SCF expiration comes after PSI expiration, approval of a new PSI would normally take place only after expiration or cancellation of the SCF arrangement because PSI qualification requires a broadly stable and sustainable macroeconomic position—implying no IMF financing is needed—at time of PSI approval. Exceptions: when authorities intend to treat the SCF as precautionary; possible short PSI extensions to complete final review. - SCF does not require issuance of a PRS-related document, but such a document must exist by the time of completion of the second and subsequent reviews under a PSI or the requirement must be otherwise met. - The PSI review schedule could remain on the “fixed review cycle” or be aligned to the more flexible SCF review cycle. - RCF access: - Access to RCF support is presumed for countries with an approved PSI that subsequently experience an urgent balance of payments need, subject to RCF qualification requirements. - Blending and concessional resources: - Countries meeting criteria that create a presumption for blending would be expected to receive assistance through blended GRA and PRGT resources if they experience a balance of payments need during a PSI-supported program. - PRGT-eligible countries, including members qualifying for SCF or RCF financing during a PSI, would be expected to use either fully concessional or blended resources, rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources. - Use of SMP or RCF to establish PSI track record: - Members may use an SMP (or, in urgent cases and assuming applicable policy commitments are in place, the RCF) to establish a track record for a PSI. - Normal procedure for bringing an off-track PSI-supported program back on track is completing the next scheduled review (after appropriate corrective actions) rather than through an SMP. ### Financing assurances, arrears, and safeguards - Financing assurances: - PSI-supported programs require the same financing assurances as Fund financial arrangements. - PSIs can only be approved (and reviews completed) when the program is fully financed. - Staff should confirm no unfilled financing gaps over, normally, the next 12 months immediately following PSI approval (and completion of each review) and a clear expectation the program will be fully financed through the remainder of the PSI period. - When PSI support is provided alongside SCF or RCF financial assistance, assurances should also show the country has capacity to repay the Fund through medium–term balance of payments projections and the standardized table on indicators of the capacity to repay the Fund. - Arrears: - Fund’s policy of non-toleration of sovereign external arrears to official (multilateral and bilateral) creditors applies analogously to the PSI. - Fund generally calls for resolution of existing arrears to official creditors and non-accumulation of new arrears during the program period. - PSI users are not expected to have external arrears given qualification requirement of a broadly stable and sustainable macroeconomic position. - If external arrears exist, they can be addressed depending on creditor type; country teams should seek guidance from LEG and SPR on application to specific creditors. - Macroeconomic program assumptions under the PSI should be consistent with expected resolution of any existing arrears to official creditors; authorities and staff should have common understandings on timing and modalities of arrears clearance. - Sovereign arrears to private external creditors and non-sovereign arrears due to exchange controls are covered by the LIA policy, which applies analogously to the PSI: - Under LIA, the Fund can lend in cases of sovereign arrears to private external creditors only where: (i) prompt Fund support is essential for successful implementation of the member’s adjustment program; and (ii) the member is pursuing appropriate policies and making a good faith effort to reach a collaborative agreement with creditors (or facilitate such an agreement) and good prospects exist for removal of exchange controls. - PSI-supported programs should address domestic arrears as part of program design; specification depends on country context and fiscal framework (see Appendix II). - Overdue obligations to the Fund: - A member in arrears to the Fund in the GRA, or to the Fund as Trustee (including the PRGT), is not eligible for PSI support. - If a member were to incur arrears into GRA or PRGT, any existing approved PSI would be terminated. - Safeguards assessments: - A safeguards assessment is not required for a PSI. - Members with a PSI are encouraged to undertake a safeguards assessment voluntarily to enhance accountability, transparency, and institutional strength of their central banks and to facilitate quick access to Fund resources if needed. - The safeguards process involves analysis of documents and discussions with authorities and the central bank’s external auditors and evaluates governance, auditing, financial reporting, control systems, and legal autonomy of the central bank. - Close cooperation and coordination between FIN, other functional departments, and area departments is essential; FIN should be kept informed of safeguards issues, including timing of new arrangements and reviews. ### Program objectives and design - Overall aim: - All PSI-supported programs aim at maintaining or consolidating a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Specific aims of PSI-supported programs should include maintaining or consolidating: - (i) strong and durable poverty reduction and growth, - (ii) low or moderate inflation, - (iii) sustainable fiscal and current account balances, - (iv) limited debt vulnerabilities, - (v) adequate international reserves, - (vi) sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Program design alignment: - Should be aligned with the country’s own poverty reduction and growth objectives. - Specific policy objectives should be clearly articulated in the LOI/MEFP and associated staff report for a new PSI; typically include: - Fiscal policies: (i) well-anchored fiscal stance to ensure macroeconomic stability and fiscal/debt sustainability; (ii) revenue and spending policies considerate of growth and social objectives; (iii) budgets guided by medium-term fiscal frameworks to extent possible. - Monetary policies: consistent with inflation, exchange rate, and reserve objectives, taking due account of cyclical considerations. - Exchange rate policies: ensure a unified exchange rate and a real exchange rate level broadly in line with fundamentals, ensuring a stable and sustainable external position consistent with adequate growth. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: ensure resources are tracked, reported, and targeted appropriately (including adequate resources for social and other priority spending); public debt management aimed at supporting debt sustainability; revenue reforms aimed at broadening revenue base and enhancing tax efficiencies. - Other structural reforms: focus on “second-generation reforms” to enhance growth potential and capacity to manage volatility. ### Links to poverty reduction strategies (PRS) and social spending - PSI programs should be aligned with country poverty reduction and growth objectives; guidance for PRS linkages: - New PSI requests and PSI reviews are expected to be accompanied by a statement, normally in the LOI or MEFP, of how the PSI advances the country’s poverty reduction and growth objectives; description expected to be more detailed at initial PSI request or when a new PRSP (or I-PRSP) is produced. Where a relevant PRS document exists, LOI/MEFP description may cross-reference the PRS document. - If a PRS document exists, PSI-supported program should be consistent with PRS objectives in context of maintaining a broadly stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - If no relevant PRS document exists, program documentation should outline country’s medium-term poverty reduction and growth objectives and policies; subsequent program documents should refer to and update this documentation as necessary. - While a PRS document is not required at time of initial Board consideration of the PSI request, the second (and every subsequent) review under the PSI can only be completed if a PRS document has been issued to the Board, normally within the previous 18 months, and has been the subject of a staff analysis, including in the staff report on a new PSI or on a review. - Alternatively, PRS documentation requirements for completion of the second or any subsequent review can be met by describing in the LOI/MEFP how the current budget, upcoming fiscal budget (if available), and planned structural reforms advance PRS implementation. This flexibility is only available if, at time of the Board meeting considering the review, a PRSP issued to the Board covers at least 12 months from the date of completion of the review. The accompanying staff report must provide staff’s views on how the budgets and planned structural reforms help advance PRS implementation. - Staff should inform authorities early about definitions and timelines for PRS documentation requirements to ensure adequate time for PRS process. - Staff are required to prepare JSANs for PRSPs and I-PRSPs generally within four months of transmission of a PRSP or an I-PRSP (outside the HIPC context). For APRs, providing feedback in an annual feedback process is good practice. - If a JSAN has not yet been prepared, the Executive Board can still make decisions governing members’ PSIs, including completion of reviews, if relevant preliminary staff analysis has been included in the staff report or a supplement; the JSAN and PRSP would be discussed at the next Board meeting. JSANs can be submitted to the Board for information or discussion. - PRS documents should normally be produced by authorities on a 12-month cycle and aligned with other domestic policy cycles. - In case of significant weaknesses in the PRS (including those identified in the JSAN or AFP), program staff reports should report how these weaknesses are being addressed; addressing identified PRS weaknesses is expected but not a requirement for PSI support. *Source: _082714 - 233. Extensions must be requested by the member and approved by the Board before the (PDF chapter/section).* ### 253. Social and other priority spending should be safeguarded and, whenever appropriate, ### _082714 - 253. Social and other priority spending should be safeguarded and, whenever appropriate, ### Safeguarding social and other priority spending - Policy recommendation: Social and other priority spending should be safeguarded and, whenever appropriate, increased under PSI-supported programs. - Monitoring approach: Use explicit program targets, for instance through an indicative floor on social and other priority spending. - Definition: What constitutes social or other priority spending should be consistent with the authorities’ poverty reduction and growth objectives. - Implementation support: - If such expenditures are not tracked, program documentation could report on progress in developing a tracking system. - Staff should alert authorities that the Fund’s concessional financial support generally includes conditionality related to safeguarding social and other priority spending where feasible. ### Debt Sustainability Analysis (DSA) - Requirement: PSI-supported programs should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks. - Collaboration: Country teams should engage with the authorities in the preparation of DSAs, discuss results, and share final files with relevant officials. - Joint preparation: DSAs for most LICs are usually prepared jointly with the World Bank; country teams should involve other relevant MDBs. Joint DSAs are required for PRGT-eligible IDA-only countries; for LICs that are not IDA-only, close consultation with the Bank is recommended. - Frequency and triggers: - A fully elaborated DSA is required at least once every three years, with shorter annual updates in the interim years possible in the absence of significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risks. - A DSA (or DSA update) may need to be prepared for higher access financing requests (augmentation or new arrangement) and when PSI support is provided alongside RCF or SCF support. - In some cases, a DSA update may be prepared unilaterally by Fund staff drawing on a prior full joint Fund-Bank DSA if a joint DSA was prepared recently and the analysis would not result in a change of the risk of debt distress rating. - Presentation and template: - DSAs for LICs should be presented as self-contained documents. - Normally use the LIC Debt Sustainability Framework (DSF); for countries with durable and substantial access to market financing, the middle-income template can be used. - DSA components (three components): - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit assessment of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions in the country; - Recommendations on a borrowing (and lending) strategy to limit the risk of debt distress, while maximizing the resource envelope to achieve the country’s development objectives. ### Collaboration with the World Bank and other development partners - Requirement: Fund staff should consult closely with all major development partners active in the country when designing and monitoring a PSI-supported program. - JMAP: The JMAP calls on Bank and Fund country teams to consult with each other at least once a year to identify key macroeconomic and structural reform challenges and coordinate work plans. ### Conditionality principles and specification - Purpose of conditionality: Assess whether a member’s policies are strong enough to meet program objectives; conditions normally consist of macroeconomic variables and structural measures reasonably within the member’s direct control. - UCT-standard: PSI-supported programs must meet the UCT-conditionality standard to ensure commitment and capacity to implement policies adequate to correct external imbalances and enable repayment to the Fund. - Types and timing of conditions: - Program conditionality will include quantitative periodic and continuous ACs, typically indicative targets and structural benchmarks, and prior actions if critical. - Conditionality is set at approval and updated at program reviews; should normally be set (or modified) by the Board before the test date. - For post-dated ACs, program documents must be signed and circulated to the Board along with the staff report before the test date. - Prior actions: - Defined as measures expected to be adopted prior to Fund approval of a PSI, completion of a review, or granting of a waiver with respect to an AC when critical for successful implementation. - Should be applied parsimoniously and specified in clear, objective, and unambiguous terms. - Prior actions should in principle be implemented at least five working days before the Board discussion. - Frequency and cadence: - Quantitative ACs would normally be set on a semiannual basis and tied to semiannual program reviews. - Quantitative benchmarks (indicative targets) would normally be specified on a quarterly basis. - Interval between scheduled review dates may not exceed six months and there should be ACs associated with each review. - Conditionality should cover all test dates that fall within the 12 months after the Board meeting. - At initial approval and each review, ACs must be established for the shorter of (a) the next two scheduled reviews or (b) the remaining period of the PSI. - Typical quantitative ACs: net international reserves, central bank domestic assets, domestic and fiscal balances or financing, limits on nonconcessional external debt, and any other macro-critical indicators. - Indicative targets: should include a floor on social and other priority spending where possible, and may include other indicators such as reserve money. - Continuous ACs: always include commitments related to non-introduction or intensification of exchange restrictions and on non-introduction or modification of multiple currency practices; typically include non-accumulation of external payments arrears. - Structural benchmarks: - PSI-supported programs normally include an agenda for macro-critical structural reforms focused on “second-generation reforms.” - Structural benchmarks are critical measures intended as clear markers for program reviews. - Structural benchmarks should be used parsimoniously and macro-criticality explicitly justified. - Specific objectives should be defined for periods covered by individual reviews; PSI-supported programs would typically contain less than five structural benchmarks per semiannual review. - Structural ACs were discontinued in 2009. - Delays and modifications: - If implementation of a structural benchmark is delayed beyond the test date, it will be found not to have been met but can be proposed as a new structural benchmark linked to the next program review if still macro-critical. - If implementation is no longer possible as defined, a new or modified benchmark may be appropriate if critical to achieve program goals. ### Waivers, modifications, and misreporting - Waivers: - A waiver for nonobservance of an AC may be granted if the Fund is satisfied the program will nevertheless be successfully implemented because of minor or temporary nature of nonobservance or remedial actions by the authorities. - A formal request from the member is not required under the PSI; waivers are only approved for quantitative ACs tied to the review being completed or for continuous ACs that have been missed. - Waivers of applicability are not possible under a PSI. - If data on performance are not provided such that observance cannot be determined, the corresponding review cannot be completed. - Modifications: - Modifications to Board-set conditionality may be appropriate when departures from ACs are expected because basic program assumptions were not realized or significant unanticipated developments occurred, provided new targets remain macro-critical. - Requests for modifications must be submitted to the Board before the relevant test date and approved by the Board before information on observance is available, normally in the context of a program review. - In exceptional cases, modifications can be approved outside a review if authorities and staff have common understandings documented in a revised or new LOI with an updated AC table, and where relevant, TMU. - Misreporting framework: - The PSI misreporting framework is simplified compared to the UFR context. - Board decisions approving a PSI or completing a review under a PSI are conditioned on the accuracy of information reported by the member on performance under assessment criteria and on prior actions specified in the Board decision. - If evidence indicates inaccurate reporting in relation to a PSI approved or a review completed within the preceding three years, the Managing Director shall promptly inform the member. - The Managing Director shall notify the member if, after consultation, the member had reported inaccurate information to the Fund. - The Board’s consideration of misreporting will normally take place at the next scheduled PSI review, based on a combined misreporting/review staff report, but could take place earlier if warranted. - The Executive Board shall reassess program performance in light of revised information; reassessment will not lead the Board to retroactively reverse its decision completing a review. - In all non-de minimis cases in which the Board has determined misreporting has occurred, relevant information on the Board decision, such as the finding of misreporting and any impact on past Board assessments under the member’s PSI, will be published. - There are no waivers in the context of the PSI misreporting framework. ### Program reviews - Purpose: Evaluate whether the program is on track to achieve objectives using backward-looking assessment of performance against quantitative ACs, structural and quantitative benchmarks, and prior actions, and a forward-looking assessment of prospects for successful implementation. - PRS requirement: The second (and every subsequent) review can only be completed if a PRS document has been issued to the Board, normally within the previous 18 months. - Scope at final review: At the time of consideration of the final review under a PSI, and assuming no further Fund program support is expected, the forward-looking assessment could be more limited than for previous reviews. - Consequences: - Completion of a review by the Board signifies the Fund’s assessment that the program is on track. - Noncompletion of a scheduled review signals that the program is off track. - Noncompletion of two consecutive scheduled reviews would automatically terminate the PSI. *Source: _082714 - 253. Social and other priority spending should be safeguarded and, whenever appropriate,* ### 276. Reviews also update the program design, in particular by specifying forward-looking policies ### _082714 - 276. Reviews also update the program design, in particular by specifying forward-looking policies ### Role of reviews and documentation at approval and review - Reviews update program design by specifying forward-looking policies and conditionality and are the main vehicle for any potential modifications to program design. - At the time of approval and for each review: - The authorities’ LOI presents or updates their policy program. - A staff report provides an overall assessment of performance and policy commitments. - The last sentence of the staff appraisal is standardized: “Staff recommends completion of the X scheduled review.” The Chairman’s statement includes: “The X scheduled review is completed.” The factual statement/press release should include the same reference. ### “Fixed” review schedule and test dates (PSI) - Timing of all reviews and test dates is summarized in a staff report table at the time of PSI approval and updated as needed at reviews. - The quantitative indicator table (“AC table”) attached to the LOI/MEFP should clearly identify ACs and indicative targets, including adjustors, for at least a 12-month period from the Board date of the PSI approval or review. - The structural benchmark table should cover measures over at least a 12-month period, indicating the reviews that individual benchmarks are linked to. - The Decision attached to the staff should specify all ACs and review dates over the next 12 months from the Board date of the program approval/review. - Test dates and scheduling rules: - Test dates for quantitative ACs are linked to reviews that will be conducted irrespective of program implementation status or prospects. - When designing the schedule of test dates, alignment with the country’s budget cycle should be carefully considered. - Flexibility: specific review dates and test dates may be scheduled at most six months apart. - Periodicity of program reviews can be timed flexibly; each review must be associated with its own set of ACs and disbursements. - PSIs with a higher frequency of reviews require ACs and disbursements of similar frequency. - Data and timing constraints: - Test dates for ACs must be set such that all scheduled reviews can take place before the end of the PSI period, taking into account reporting lags and preparation and circulation periods for staff reports. - Review dates specified in the LOI/MEFP and the Decision should be set so that all data needed to confirm observance of ACs at related test dates would have become available. - Issuance and Board discussion timing: - All program documentation for a review should normally be issued to the Board within four months following the test date for the quantitative ACs linked to that review. - The LOI shall in any case be issued prior to the test date for the earliest periodic quantitative ACs linked to the next scheduled review. - It is expected that Board discussion of the review would normally occur two weeks after issuance of such documentation. - The staff report can be issued up to one month after that test date (flexibility to finalize understandings or await implementation of essential structural reforms), but the LOI and MEFP would normally have to be signed and circulated to the Board before the test date of the periodic assessment criteria associated with the next review. - Program period timing: - The program period supported by a PSI would typically start somewhat before the Board approves the PSI, and three to six months before the first test date under semiannual monitoring. - The program period should normally not start more than three months prior to the Board meeting, and in any case not before authorities and staff have discussed program parameters. - Concurrent SCF arrangements: - If a member implementing a PSI-supported program also has an SCF arrangement, program reviews under the SCF should be scheduled at the same time as reviews of the PSI-supported program, and performance criteria under the SCF shall normally be established for the same test dates (and apply to the same variables and measures) as ACs under the PSI. - A single set of documents related to PSI and SCF reviews should normally be issued to the Board. - Schedule alignment options: - PSI can remain on the fixed review cycle while SCF uses its more flexible cycle. - Documentation for a PSI review must be issued to the Executive Board before the next relevant test date, irrespective of program performance and whether the review will be completed. - Shifting a PSI to the SCF review schedule requires amending the approved PSI so a PSI review can be completed at a later stage. ### Noncompletion of reviews and consequences - If performance is not sufficiently strong, or understandings on forward-looking elements cannot be reached: - A staff report must still be circulated to the Board normally within four months of the test date of the periodic ACs linked to that review and in any event prior to the test date linked to the next scheduled review. - The report will assess performance relative to program objectives and indicate areas of divergence between staff and authorities. - The staff appraisal will recommend that the review not be completed at this time and, to the extent possible, elaborate steps needed to bring the program back on track. - The last sentence of the staff appraisal would be standard: “Staff does not recommend completion of the X scheduled review.” The Chairman’s statement includes: “The X scheduled review is not completed.” The factual statement/press release should include the same reference. - Returning to an uncompleted review: - Normal procedure to indicate a return to on-track status is completion of the next scheduled review. - Staff assessment letters can fill information gaps between scheduled reviews and report on performance improvements following an uncompleted scheduled review. - Returning to an uncompleted review is possible but very rare, given timing constraints; not available if the review is the second consecutive uncompleted scheduled review. - Lapse of PSI: - Noncompletion of two consecutive scheduled reviews (or, with concurrent SCF use, if no scheduled review is completed within 12 months of the completion of the last scheduled review) signifies lack of Board endorsement of the member’s policies, and the PSI would automatically lapse as of the date of the Board’s second consecutive decision not to complete a scheduled review. - After PSI lapse, an SMP may be appropriate in some circumstances to reestablish a track record toward future Fund-supported programs; see Appendix III (discussion of types of track records). - Staff appraisal language when two consecutive reviews not completed: “Staff does not recommend completion of the X scheduled review. With two consecutive reviews not completed, the current PSI would lapse.” Chairman’s statement: “The X scheduled review is not completed. With two consecutive reviews not completed, the current PSI will now lapse.” The factual statement/press release should include this same reference. ### Other relevant policies applying to the PSI - EPAs: - Engagement under the PSI does not count toward determining the policy on longer-term program engagement (LTPE). - For members interested in a PSI for which an EPA is otherwise required, the EPA would be expected before, and in any case no later than, the Executive Board’s consideration of the request for a PSI. - PPM: - Engagement in a PSI provides an alternative vehicle for PPM for members subject to such monitoring in light of outstanding Fund obligations. - Members with a PSI would be treated similarly to members with programs supported by a Fund financial arrangement or SMPs for PPM purposes. - PSI staff reports should include a section on the member’s capacity to repay the Fund where applicable. - Article IV cycle: - The 24-month cycle for Article IV consultations applies to members with a PSI. - Article IV consultations with members that have an on-track PSI arrangement would be expected to be completed within 24 months after the completion of the previous Article IV consultation. - If a program review is not completed by the date specified in the arrangement, the next Article IV consultation would be expected to be completed by the later of: - (i) six months after the scheduled review date; and - (ii) 12 months plus a grace period of three months after the previous Article IV consultation, - unless the program review has been completed prior to the later of these two dates, in which case the 24-month cycle continues to apply. - A member that has completed a PSI by completing all reviews may remain on the 24-month cycle if it does not meet any of the criteria in paragraph 2 of Decision No. 14747-(10/96): - (i) the member is of systemic or regional importance; - (ii) the member is perceived to be at risk, or is facing pressing policy issues of broad interest to the Fund membership; or - (iii) the member has outstanding Fund credit exceeding 200 percent of quota. - At the time of the final review under the PSI, staff should assess whether the consultation cycle should be shortened back to 12 months, based on the criteria above; the staff report for the final review should seek the Board’s approval if shortening is appropriate. - Where the PSI is cancelled by the member or expires with uncompleted reviews, the member will remain on the existing cycle unless the Executive Board determines otherwise based on the criteria in Decision No. 14747-(10/96). - Exchange system and data obligations: - Requirements under Article VIII Sections 2, 3, 4, and Article XIV are discussed in Article VIII Acceptance by IMF Members—Recent Trends and Implications for the Fund (IMF, 2006d). - A standard continuous AC applies inter alia to the non-introduction or intensification of exchange restrictions and to the non-introduction or modification of multiple currency practices (see Appendix II, Section G). - HIPC and MDRI: - Countries with unsustainable external debt situations that qualify for HIPC debt relief do not meet the qualification standard for a PSI. - PSI-supported programs are not included in the programs specified by the PRGF-HIPC Trust Instrument for establishing track records toward the HIPC decision or completion points. - Side letters: - Use of side letters in LIC programs has been extremely rare. - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine authorities’ efforts to prepare domestic groundwork for a measure. ### Appendix I — Documentation and Review Process (overview) - Responsibility and clearance: - All staff papers concerning the UFR, other program support (PSI and SMP) and surveillance for a particular country are prepared by area department-led mission teams. - Area department and SPR have joint responsibility for clearance prior to submission to management. - The review process also involves LEG and FIN; other functional departments review according to internal rules and follow the review-on-demand principle. - Pre-mission work and early consultation: - Mission teams are encouraged to consult informally with SPR (and if relevant FIN or LEG) at an early stage for information on relevant Fund policies, including choice of LIC instrument, access and phasing, PRS and DSA requirements, early Board briefings, and technical issues related to HIPC/MDRI, safeguards assessments, external arrears, financing assurances, misreporting, exchange restrictions. - Policy Note (PN): - Area departments prepare a PN for policy discussions (UFR, surveillance, and other program support). - The PN should include: - (i) background diagnostics (including recent developments), - (ii) the economic outlook, - (iii) staff’s and the authorities’ positions on key policy issues, - (iv) program objectives and design where relevant, and - (v) risks and mitigation measures. - Supportive charts should be included; PN should include standard macroeconomic tables (see below). - Divergences of views with reviewing departments should be flagged in the PN. - Final PN should be sent to management for clearance; procedures for management clearance decided jointly by area department and SPR per criteria in Table 1. - Standard macroeconomic and program tables: - Standard macroeconomic tables: (a) selected economic indicators; (b) government accounts (in national currency and percent of GDP); (c) monetary survey (central bank accounts and commercial bank accounts); and (d) the balance of payments. - Program tables should include: - (a) a table with quantitative conditionality (the “PC table”) covering: - (i) previously established targets and outturns (PCs and indicative targets) over at least the past 12 months, - (ii) PCs established for the next 12 months (from the expected Board date), and - (iii) indicative targets through the end of the calendar year (or fiscal year) for which policies are being discussed; - (b) a structural benchmark table covering: - (i) the implementation status of previously established benchmarks and - (ii) benchmarks covering the next 12 months, highlighting timing and macro criticality; - (c) a table with the approved and proposed schedule of disbursements and reviews; - (d) financing requirements and sources, and, in the case of new financing requests or augmentations, or if the macroeconomic environment has changed significantly, - (e) the member’s capacity to repay the Fund. - Background material and PN circulation: - Area departments are encouraged to attach concise and focused appendices to the PN (analytical underpinnings of program design, the DSA, exchange rate assessment, HIPC/MDRI issues). - Attaching draft staff reports is not encouraged. - Area departments can request cross-country information from functional departments and should informally contact them one to two months before the mission. - PN length and types: - A full PN (typically 3–4 pages text) to be circulated for departmental review is required for all missions, staff visits, and authorities’ visits with substantive policy discussions not mostly covered in a previously cleared PN. - Shortened PN appropriate when continuing policy discussions consistent with a previous full PN; should include recent developments, status of discussions, and justification for proposed changes. - For technical or information-seeking staff visits, a short memorandum circulated to review departments for information only is sufficient if no change in policy line or circumstances since last staff report/PN. - Policy Consultation Meetings (PCM): - A PCM should be held approximately two to three weeks prior to missions to establish the final PN, discuss issues, and ideally reach agreement. - Review departments should ensure appropriate representatives attend; functional departments may send technical experts. - All policy issues should ideally be raised at the PCM. - PCM participants are encouraged to confirm shared understanding at the end of the PCM and work interactively toward finalizing the PN; a follow-up meeting may be called if needed. - Reviewing departments are encouraged to circulate cross-country and technical analyses ahead of the PCM and give the area department an informal heads up of issues they intend to raise (avoid extensive written comments). *Source: _082714 - 276. Reviews also update the program design, in particular by specifying forward-looking policies* ### 9. Cover memorandum for PN: The final PN should be sent to management for clearance ### 9. Cover memorandum for PN: The final PN should be sent to management for clearance ### Management clearance and cover memorandum - The cover memorandum should provide concise and candid information on: - (i) key issues—economic situation, including vulnerabilities to an external or financial crisis; - (ii) staff’s main recommendations; - (iii) main issues raised in the review process; and - (iv) any controversial aspects. - The cover memorandum should clarify the requested management action. - SPR will review the cover memorandum but does not “clear it”—any departmental disagreements should be fully reflected in the cover memorandum. - The protocol for management clearance of the cover memorandum is provided in Table 1 (Appendix Table 1: Management Clearance) and identifies processes and circumstances, including: - Management review for systemic, vulnerable, new program, or exceptional access countries. - Lapse of Time basis for All other countries. - Meeting with Management when there are major differences of views between area and reviewing departments. --- ### C. On Mission ### LOI/MEFP (point 10) - For new financing/program requests and for program reviews, authorities must sign a Letter of Intent (LOI) setting out policies and measures they intend to pursue in line with their Fund-supported program; the LOI typically includes an accompanying Memorandum of Economic and Financial Policies (MEFP). - Standard practice: both the Minister of Finance and the Governor of the Central Bank sign the LOI (Governor signature may not be appropriate in currency unions). Signature by presidents and prime ministers is also possible. - For routine program reviews, a more detailed LOI could in some cases obviate the need for an MEFP, provided a previous MEFP discussed policies applicable to the 12-month period following the review. - LOI/MEFP should usually contain: - (i) a table with quantitative performance criteria that cover the next 12 months (from the Board date) and indicative targets that extend through the end of the calendar year (or fiscal year) for which policies are being discussed; and - (ii) a structural benchmark table, with benchmarks covering the next 12 months, highlighting their timing and macro criticality. - The LOI should include the standard consultation clause for revisions to measures outlined in the MEFP. - For initial program/financing requests and at each review the LOI/MEFP should specify how the program advances the country’s poverty reduction and growth objectives and policies; the description is expected to be more detailed at the time of the initial program request or when a new PRSP (or I-PRSP) is completed. - A draft LOI/MEFP should be discussed during the mission; these understandings are reached with staff ad referendum (subject to Fund management approval). Authorities should not sign the LOI prior to management approval. ### Technical Memorandum of Understanding (point 11) - For new program/financing requests, the LOI/MEFP must be accompanied by a Technical Memorandum of Understanding (TMU) that clearly and precisely defines the PCs under the program, including: - definitions of indicators; - coverage of government and the monetary authorities; - exchange rate valuation for program purposes; - program adjustors; - data submission requirements. - Standard language on the definition for external debt should also be included. ### Side letters (point 12) - Side letters in LIC programs are extremely rare. - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine authorities’ efforts to prepare the domestic groundwork for a measure. ### Concluding Statement and End-of-mission Press Release (points 13–14) - Concluding Statements: - Summarize discussions between country authorities and an IMF staff team. - Are agreed by the country authorities and the IMF mission team, and can be posted on the IMF website if desired by the authorities and mission team. - For Article IV missions, teams typically leave a Concluding Statement with the authorities recapitulating the mission’s assessment and policy advice. - End-of-mission Press Release: - Often useful when understandings on a new program/financing request or program review are reached. - Staff should inform the authorities of intention to issue a press statement. - Missions are encouraged to inform the COM country press officer or Media Relations and should clear the written statement before release. - Missions should give the authorities an opportunity to review the draft press statement. --- ### D. Post-Mission Work ### Back-to-Office Report (point 15) - The mission chief should send a back-to-office report (BTO) to management within two working days of the mission's return to headquarters. - The BTO should be short (up to two pages), mention the nature of the mission (mission members listed in a footnote), and the key issues, with an attached Selected Economic Indicators table. ### Staff Report (points 16–19) - A staff report is required for: - an Article IV consultation, - initial program or financing request, - each program review. - Short staff reports to the Board are required where program design is modified in between reviews (e.g., modification of PCs, short-term extension of arrangements, augmentation requests at ad hoc reviews). - Staff reports should include: - (i) background diagnostics (including recent economic and political developments); - (ii) the economic outlook, including downside risks and debt vulnerabilities (referring to the most recent DSA); - (iii) the authorities’ policy objectives and plans; - (iv) a staff appraisal of the key policy issues. - Where applicable, staff appraisals should recommend approvals for: - (i) waivers of nonobservance of PCs; - (ii) extension of arrangement; - (iii) augmentation; - (iv) rephasing; - (v) modification of existing PCs. - Program documents involving initial requests for ECF, SCF, RCF, or PSI support should set out overall program objectives and specific policy understandings, explain instrument choice, determination and phasing of access, and design of conditionality. - All program staff reports should discuss key near-term policy goals and commitments (typically over the next 12 months), and program financing. - Staff reports should contain a full set of macroeconomic tables, including: - (a) selected economic indicators; - (b) government accounts (in national currency and percent of GDP); - (c) monetary survey (central bank accounts and commercial bank accounts); and - (d) the balance of payments. - A standard table on Millennium Development Goals (MDG) indicators should be included in staff reports about once a year (normally staff reports covering Article IV consultations and request for new Fund-supported programs). - Staff report tables for program requests or reviews should also include: - (a) the approved and proposed schedule of disbursements and reviews; - (b) financing requirements and sources; and, in the case of new financing requests or augmentations, or if the macroeconomic environment has changed significantly, - (c) the member’s capacity to repay the Fund. - In cases of significant change in the macro-environment, the staff report should include staff’s qualitative assessment of the member’s capacity to repay the Fund. ### LOI/MEFP attachments and tables (point 20) - The LOI/MEFP attached to program requests or reviews should include: - (a) a table with quantitative conditionality (the “PC table”) that covers: - (i) previously established targets and outturns (PCs and indicative targets) over at least the past 12 months—alternatively, reporting on past performance relative to quantitative targets can be included as a separate table in the staff report; - (ii) PCs established for the next 12 months (from the expected Board date); and - (iii) indicative targets through the end of the calendar year (or fiscal year) for which policies are being discussed; - (b) a structural benchmark table covering: - (i) the implementation status of previously established benchmarks—alternatively, reporting on the status of previously established structural benchmarks can be included as a separate table in the staff report; and - (ii) benchmarks covering the next 12 months, highlighting their timing and macro criticality. ### Management Clearance Memo (point 21) - Management clearance of staff reports is based on a clearance note that: - states the main issues addressed in the report; - lays out any differences in views among departments; - explains any significant deviations from the PN; - highlights potentially controversial issues. - A copy of the staff report’s Executive Summary should be attached. ### Debt Sustainability Analysis (DSA) (point 22) - A Joint Bank-Fund low-income country DSA (LIC DSA) should be prepared once a year for PRGT-eligible, IDA-only countries. - A DSA (or DSA update) may be required to support the proposed level of access (see Section D of the Handbook Chapters on the ECF, SCF, and RCF). - The main conclusions of the DSA and its update should be discussed in the body of the staff report. - The DSA or its update is subject to the same review process as a staff report and, when finalized, if not published as a stand-alone document, should be included as a supplement to the staff report. - The final versions of the DSA files (external and fiscal templates) should be submitted to the SPR review box at the time the DSA (and staff report) is sent to the Board. ### Informational Annex (point 23) - An informational annex should be issued as a supplement to ECF, SCF, RCF, PSI, SMP, and Article IV reports. - The annex comprises: - Relations with the Fund and Bank-Fund Collaboration, including the JMAP matrix; - Relations with other Multilateral Institutions if applicable. - A Statistical Issues annex should be included at least for Article IV reports. - Annexes are subject to departmental review but do not require management clearance. - Annexes should not be attached to the staff report; at issuance of the staff report to the Board, annexes should be sent to SEC and posted on the web as a supplement to the staff report. ### Summing Up / Chairman’s Statement (point 24) - All stand-alone UFR discussions and combined UFR with Article IV discussions require both a Summing Up and Chairman's Statement (Table 4). - Summings Up: - Are read out for directors' comments at the conclusion of the Board meeting. - Should summarize issues in a readily understandable way and avoid overly long or complex sentences. - For a combined UFR with Article IV discussions, contain a section on key policy issues discussed in the Article IV followed by a separate short section at the end on key program issues. Only the latter section is required for a stand-alone UFR discussion. - Should cover core areas: recent economic performance or performance under the program, the economic outlook, risks and challenges, and macroeconomic and structural policy issues. - Should have a clear forward-looking element and, for a program country, include what directors consider the most critical elements for program success. - Chairman’s Statements: - Prepared after the Executive Board adopts a decision regarding a country's use of Fund resources, or completes a discussion about a country's participation in the HIPC initiative or a country's PRSP-related document. - Intended to inform the public of the Board's decision on a UFR program and the Board's overall policy message. - Should convey a few (three to four) points on which the Board placed emphasis and not attribute statements to directors. - Staff should exercise caution when referring to highly market-sensitive issues. - Appendix Table 2: Summing Up, Chairman’s Statement, and Press Release indicates: - Stand-alone UFR: Summing Up = Yes; Chairman's Statement = Yes; Press Release = No. - Combined UFR with Article IV: Summing Up = Yes; Chairman's Statement = Yes; Press Release = Yes. - Combined Ex Post Assessment/UFR: Summing Up = Yes; Chairman's Statement = Yes; Press Release = Yes. - Stand-alone Post Program Monitoring or Ex Post Assessment: Summing Up = Yes; Chairman's Statement = No; Press Release = Yes. ### Press Release and Staff Statements (points 25–26) - Press Release: - COM issues Press Releases for new arrangements and reviews, containing the Chairman’s statements. - Area Departments prepare the background section, to be reviewed by SPR upon demand. - COM prepares the initial draft, including the Chairman’s statement, and requests comments from the area department, LEG, FIN, and the executive director of the country in question. - Staff Statements: - Prepared if new or additional information becomes available after submission of the staff report to the Board and before the Board meeting. - Should explicitly mention whether the new information changes the thrust of staff’s assessment in the staff report. - The statement should be sent to SPR for clearance. - The statement should be sent to management for their information and SEC for Board circulation, at least four days before the Board meeting. --- ### E. Other Documents ### Ex Post Assessment (EPA) (point 27) - An Ex Post Assessment (EPA) is required for all members considered as having long term program engagement (LTPE), defined as having in place a Fund-supported financial arrangement for at least seven of the past 10 years. - Time spent under the PSI and arrangements treated as precautionary does not count towards LTPE. - For members meeting the LTPE definition and for whom an EPA has not been prepared in the past five years, if a successor arrangement is contemplated, EPAs should be prepared in time to be considered by the Board prior to a request for a new arrangement. - EPAs should preferably be prepared and circulated to departments prior to the PN for an Article IV consultation and before negotiations begin on a successor arrangement. - Where not possible, a draft EPA should be prepared prior to the preparation of the PN for the final review of the existing arrangement. - In exceptional cases where Board discussion of the EPA together with the Article IV or last program review proves not feasible, the EPA could be considered in a stand-alone Board meeting. - If no successor arrangement is contemplated, an EPA should be prepared such that it is considered by the Board with the first post-program Article IV consultation. - The revised policy on EPAs distinguishes between the first EPA for a member (an EPA report) and subsequent assessments (streamlined EPA updates). - The Executive Board should be informed of an upcoming preparation of a streamlined EPA at the penultimate review of the current arrangement—or at an informal country matters session, if no current arrangement exists—up to six months in advance of the required EPA, to give Executive Directors an opportunity to request a comprehensive EPA on a case-by-case basis. *Source: _082714 - 9. Cover memorandum for PN: The final PN should be sent to management for clearance* ### 28. A Joint Bank-Fund LIC DSA should be prepared annually for PRGT eligible, IDA-only ### 28. A Joint Bank-Fund LIC DSA should be prepared annually for PRGT eligible, IDA-only countries. ### Debt Sustainability Analysis (DSA) requirements and format - A fully elaborated DSA is required at least once every three years, with shorter annual updates in the interim years possible in the absence of significant changes in the macroeconomic and financial environment, including in periods of heightened domestic, external, or global risk. - A DSA (or DSA update) may be required to support the proposed level of access. - DSAs should be prepared as self-contained documents, normally issued as a supplement to staff reports. - DSAs should include a clear description of macroeconomic assumptions without referring to the Fund staff report to which they are a supplement. - Full DSAs should be concise: four to five pages, excluding tables or any appendices. - LIC DSA updates (between full DSAs) are significantly lighter exercises and consist of a very short write up covering important changes from the previous DSA and including the usual set of tables and charts. - All DSAs must be prepared jointly by both institutions, regardless of whether the DSA is included in a Board document of one institution only, and must be submitted to both the IMF’s and World Bank Executive Boards, be it for discussion or for information. ### JSANs and PRS documents (I-PRSP, PRSP, APR) - Within four months of a country’s issuance of an interim or full PRSP, Fund and Bank staffs should prepare a JSAN, with feedback on the strategy and its implementation. - The JSAN need not be completed to allow completion of a review—i.e., the JSAN can be completed and circulated after the Board meeting, provided that this is within the four-month window. - JSANs for APRs are not required, but it is good practice to provide feedback on APRs in the context of the annual feedback process. - Staff should report on the PRS to the Executive Board at least once a year in the staff report for the Article IV consultation or the next program review. - PRS documents and JSANs are not required prior to the approval of a Fund arrangement or PSI. - To complete the second (and every subsequent) review of an ECF arrangement and PSI a country must have circulated to the Board a PRS document, normally within the previous 18 months, and the PRS must be discussed in the staff report (possibly through a reference to the JSAN). - JSANs are a requirement for interim and full PRSPs, PRSP preparation status reports, and APRs for all countries reaching HIPC decision and completion points. - All I-PRSPs and full PRSPs outside HIPC Initiative context are submitted to the Executive Board for information; associated JSANs can be submitted for information or discussion, normally at the time of the next scheduled Board meeting. - Staffs should follow the Information Note and the Joint Management Action Plan to improve coordination and timelines for review and clearance. ### The Joint Management Action Plan (JMAP) - Under the JMAP, Bank and Fund country teams should document results of an annual consultation in a joint memorandum for files, identifying: - (i) the key macroeconomic and macro-critical structural challenges facing the country; - (ii) policies and reforms to address these challenges and each institution’s priorities for supporting these reforms; - (iii) respective work plans and outputs for the next 12 to 24 months, together with tentative mission schedules and delivery dates (summarized in an “action matrix” appended to the memorandum); - (iv) information, analytical cross support, and other inputs (e.g., assessment letters) needed from institutional counterparts, including agreed delivery dates; and - (v) any substantive disagreement on any of the above issues. - When a Fund team prepares a staff report, it is expected to document Bank-Fund Collaboration in the appendix to the staff report; to avoid duplication the appendix can be a reformatted version of the memorandum. ### Review of joint documents, Assessment Letters, HIPC, and disbursement rules - Staff of both institutions should communicate at the outset to discuss review requirements and agree a coordinated timetable for all joint documents requiring review and Board consideration. - Assessment Letters: - Typically produced in response to requests from multilateral or bilateral donors or creditors, or sometimes from the member country. - Should contain a clear and candid assessment of the member’s macroeconomic conditions and prospects, and of macroeconomic and related structural policies. - Specifically should (i) identify existing macroeconomic imbalances and structural distortions; (ii) indicate the extent to which current and planned policies are dealing with or contributing to these imbalances and distortions; and (iii) highlight policy areas with major outstanding concerns. - Should be derived from and consistent with the most recently available report (PNs, staff reports, etc.). - Should contain an account of the Fund’s relations with the member country, including, where relevant, program discussions. - May not include language directly encouraging or discouraging assistance from donors. - Are subject to the same SPR review and clearance procedures as program-related documents and require management approval. - Circulation to the Board for information is required at the time of external dissemination. - May be published on the IMF's external website or by recipient institutions only with the consent of the authorities. - HIPC Documents: - If a country satisfies all eligibility criteria and requests HIPC assistance, a preliminary HIPC document is required, followed by a decision point document and a completion point document. - HIPC documents, including HIPC DSAs, are produced jointly with the Bank and are reviewed by both institutions; standard Fund procedures apply for review, clearance, and submission to the Board. - Disbursements between reviews of available but undrawn amounts under SCF arrangements: - A country may draw between reviews previously approved but undrawn amounts under the SCF if: - (i) its representation of a balance of payments need meets the requirements of the PRGT instrument; - (ii) the most recently scheduled review under the arrangement prior to the request has been completed; and - (iii) available information indicates that its continuous PCs are being met. - The Trust Instrument precludes staff from challenging a member’s representation of a balance of payments need prior to providing the requested disbursement. - The Trust Instrument indicates that if subsequently the Board decided that the disbursement took place in the absence of a need, it could seek repayment with interest normally within 30 days of its decision that early repayment is required. - For a country to draw between reviews, it must send a letter to the Managing Director communicating and explaining the decision; staff will circulate a short note for information to the Board, attaching the letter of the authorities; a press release is issued shortly afterwards. ### Chronological steps of mission-related work (selected timings) - Approx. Timing (in business days) and key actions: - 1–2 months before mission (T-75): Preparation of policy note. Team drafts PN including full set of tables and concise topical background notes. - 3 weeks before mission (T-58): Draft policy note; at least three days before the PCM, country team sends a draft policy note to SPR and other departments. All relevant background materials, including a draft DSA (if required), should be circulated at this time. - 2–3 weeks before mission (T-54): Policy Consultation Meeting (PCM). - 1.5 weeks before mission (T-50): Department Review of revised policy note/PRMED revised preliminary review. - 1 week before mission (T-48): Revised policy note to management. Allow full 3 business days for management clearance, and another 1–2 days for answering questions. - (T-43) days: Start of Mission. - (T-33) days: End of mission; reach understandings ad referendum on a LOI/MEFP. - 2 days after return to HQ (T-31): BTO (back-to-office) submission. - (T-21) days: Department Review of Staff Report, LOI/MEFP. Allow a full 3 business days for review, another 1–2 days for revisions and 1 day for final SPR review and clearance. - (T-15) days: Clearance memo and Executive Summary of Staff Report to Management. Management should be provided a full 3 business days for clearance. Allow 1 day for answering questions. Allow another 0.5 days for issuance by SEC. - (T-10) days: Circulation of Staff Report to Board. The country's ED would need to request a waiver if the staff report is issued to the Board later than 2 weeks prior to the Board meeting (plus 1 day grace). - (T-3) days: Staff Statement to SPR. - (T-2) days: Summing Up, Chair Statement, and PIN to SEC. - (T-1) days: Staff Statement to SEC; SEC will circulate statements to the Board. - T: Board Meeting; Staff Report subsequently published (given authorities' approval). ### Appendix II — Quantitative conditionality (periodicity and fiscal targets) - General periodicity and definitions: - Quantitative performance criteria (“PCs”)—or assessment criteria (“ACs”) in the case of the PSI—shall be phased no more than six months apart. - In practice, PCs are usually set on a semiannual basis and tied to semiannual program reviews, while quantitative benchmarks (indicative targets) are normally specified on a quarterly basis. - When closer monitoring is helpful, PCs and reviews could be at quarterly intervals. - Quantitative periodic conditionality should cover all test dates that fall within the 12 months after the Board meeting (initial approval or review). - Under semiannual monitoring, PCs would normally be established for two future test dates at the time of approval of the arrangement and at each review (except for the penultimate and final reviews). - The table of quantitative conditionality (the “PC table”) attached to the LOI/MEFP should clearly identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date of the program approval or review. - Indicative targets should extend through the end of the calendar year (or fiscal year) for which policies are being discussed. - The precise definitions of PCs should be set out in a TMU attached to the LOI. - Quantitative periodic conditionality is normally set as cumulative flows or changes in stocks from a single reference date (normally, the beginning of a calendar or fiscal year) through each test date; the reference date would usually be moved ahead by one year on an annual basis. - Certain indicative targets (e.g., monetary aggregates or international reserves) may be set as period averages. - Quantitative PCs typically include measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, limits on nonconcessional external debt, non-accumulation of external payments arrears, and any other macro-critical indicators. - PCs are often subject to program adjustors that reflect deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible. - Fiscal targets: - Programs should have fiscal PCs and indicative targets based on appropriate analytical fiscal indicators and desired institutional coverage. - Fiscal targets should aim to cover all relevant government entities and transactions. - Most targets are specified at the level of the central government or the general government, with the general government appropriate where sub-national governments have major fiscal responsibilities and relevant data are available. - Fiscal PCs should generally cover both budgetary and extra-budgetary activities of the government. - The TMU should provide a clear definition of what is included in the term “government” for purposes of fiscal PCs (e.g., central, central and local, or including nonfinancial public organizations). - Fiscal conditionality should be set on the indicator(s) most crucial for achieving program goals. - The program’s near-term fiscal anchor is normally monitored through a PC on either a credit aggregate (e.g., net domestic financing of the government or net banking system credit to the government) or a deficit measure (e.g., the overall deficit or the primary deficit of the government) or some combination. - Where a program is designed to address broad macroeconomic concerns, a deficit measure is a more appropriate basis for a PC. - The overall deficit excluding grants will often be a good guide to the impact of fiscal policy on aggregate demand and inflation, while the overall deficit including grants will contain the governments’ borrowing requirement and debt accumulation. - In many LICs, the near-term fiscal anchor focuses on domestic revenues and spending (excluding more volatile receipts and outlays related to donor support); countries with relatively high capacity may focus on the overall fiscal deficit. - Oil exporters may focus on non-oil balances. - Adjustors may be used to correct for volatile or one-off flows. *IMF — Appendix I and Appendix II, Documentation and Review Process; Quantitative Conditionality.* ### APPENDIX II. QUANTITATIVE CONDITIONALITY ### APPENDIX II. QUANTITATIVE CONDITIONALITY ### Fiscal targets and measurement - When debt sustainability is a concern, the primary fiscal balance is sometimes used as an alternative to the overall balance. - Targets may be set (typically indicative) on domestic revenue, domestic arrears, or on social and other priority spending. - The quality, accuracy, and timeliness of data determine precise definition of fiscal targets and whether they should be PCs or indicative. - The fiscal policy PC is often measured using “below-the-line” financing data: - Above-the-line targets (revenue, expenditure, fiscal deficit) have ownership and transparency advantages. - Financing data are usually available more frequently, more timely, and of better quality. - Revenue and expenditure data should be monitored to establish an above-the-line fiscal deficit reconciled with below-the-line financing data. - Exceptional receipts (e.g., proceeds from privatization or from a petroleum fund) should normally be defined as a financing item for program purposes, though provisions may allow some or all to be spent where appropriate. - One-off receipts should not be used to finance permanent expenditure increases. - Social and other priority spending should generally be safeguarded in Fund-supported programs in LICs: - Monitored through explicit program targets, typically an indicative floor on social and other priority spending, whenever possible. - Definition should be consistent with authorities’ poverty reduction and growth objectives. - If tracking is not feasible, program documentation should report measures envisaged to develop tracking; staff should monitor progress and relevant structural benchmarks may be included. ### Monetary targets - Monetary developments are normally monitored by setting a PC on net domestic assets (NDA), either of the central bank or the banking system (central bank NDA more likely in many LICs). - NDA of the central bank may be defined as reserve money minus net international reserves or reserve money minus net foreign assets. - Indicative targets may be set on reserve money, banking sector credit, or broad money when money or credit growth are of concern for inflation or banking system stability. - A few arrangements have set a PC on reserve money instead of NDA; choice depends on program priorities, monetary regime, and tradeoffs between protecting/increasing net international reserves and controlling inflation. - Money targets set as PCs should include an adjustor for changes in the reserve requirement, if applicable. - Review-based monetary policy consultation clause (MPCC) can be used to provide flexibility and incentivize development of monetary analysis frameworks: - Applicable where monetary policy frameworks are evolving, minimal fiscal dominance, relatively low and stable inflation, good track record of implementation, or commitment to substantial strengthening. - MPCC includes a quantified macroeconomic framework with quarterly or semiannual monetary aggregate or inflation targets set normally within a single tolerance band, assessed during program reviews. - Deviations from the band trigger consultation with the Executive Board as part of the general review process focusing on: (i) broad-based assessment of monetary policy stance and program track; (ii) reasons for deviations, considering compensating factors; (iii) proposed remedial actions if necessary. - When consultation is triggered, access to Fund resources would be interrupted until it takes place and the relevant program review is completed. - Programs under MPCC would include a NIR floor, as a PC, to maintain external sustainability and safeguard use of Fund resources. - Indicative targets related to monetary policy (e.g., on NDA or credit to the government) could be included to address country-specific risks. - If inflation is the central target, a narrower inner band could be used as an early warning mechanism to trigger an informal consultation with Fund staff. - Monetary ceilings are not required for currency board arrangements or members of a monetary union, except where the rules give some degree of control over credit growth. ### Targets for international reserves (NIR) - Developments in international reserves are normally monitored by setting a floor on official (central bank’s) net international reserves. - The PC definition should specify precise coverage of the monetary authority, particularly where it differs from or is broader than the central bank’s net foreign assets. - For programs with Fund disbursements made directly to a Treasury account at the central bank (direct budget financing), use a composite central bank–Treasury aggregate for NIR and NDA PCs: - Example: Fund disbursements deposited to Treasury account at the central bank can leave composite NIR unchanged even if central bank gross reserves increase and Treasury liabilities to the Fund increase. - Similarly, central bank NDA may decline while composite NDA remains unchanged. - Usability requirement for reserves: include only convertible, liquid, and unpledged (unencumbered) assets that are claims on nonresidents, net of short-term foreign liabilities that are public or publicly guaranteed; outstanding stock of Fund credit is netted out. - Exclude assets that are counterpart to foreign currency reserve requirement liabilities. - Foreign liabilities defined as loan, deposit, swap, and forward liabilities to residents and nonresidents whose value is guaranteed in foreign currency terms (denominated or indexed). - TMU should specify if liabilities to participants to the SDR department are included. - Valuation effects from exchange rate or gold price changes should be excluded when defining NIR floors: - TMU should specify the set of exchange rates and gold valuation used for calculating NIR. - Constant values should be used for accounting rates to avoid suggestion that accounting rates are forecasts. - Net domestic assets and net credit to the government should also be calculated using accounting exchange rates when foreign currency items are important and can be monitored. - Accounting exchange rates should be based on those prevailing at some recent, easily-checked date (e.g., the end of the previous year) and may be updated periodically. - In currency board arrangements, the monetary authority ensures full foreign reserve backing for the currency board’s liabilities for the duration of the program; the PC definition should specify exact coverage. - Floors on international reserves are not required for countries in a monetary union. ### External debt limits - Objective: prevent build-up of unsustainable debt while allowing adequate external financing. - Framework includes a menu of options for concessionality requirements depending on countries’ debt vulnerabilities and macroeconomic and public financial management capacity (“capacity”). - General rules: - A loan is normally classified as concessional if its grant element is at least 35 percent. - PV of debt at time contracted is calculated by discounting borrower’s future debt service on that debt. - The discount rate used for PV and grant element calculations is set at 5.0 percent until the completion of the next review of the Debt Sustainability Framework for Low-Income Countries, expected in 2015. - A grant element of more than 35 percent may be required where countries have high debt vulnerabilities. - A grant element of less than 35 percent could be considered for countries with strong debt indicators or countries that meet criteria for PRGT-GRA blending. - For the most advanced LICs, concessionality requirements can be dropped altogether. - Definitions and coverage: - Concessionality requirements apply to medium- and long-term external debt of the official sector. - Limits should also be used for short-term debt, with some exclusions (e.g., normal import financing). - Residency criterion used to define external debt in relatively closed capital account countries; currency-denomination criterion can be used for more open capital accounts. - Coverage of official sector expected to be broad. - Limits for lower capacity countries: - Concessionality requirements apply loan by loan. - In countries with higher debt vulnerabilities, minimum concessionality should be consistent with DSA results; grant element higher than 35 percent may be required on a case-specific basis. - Nonconcessional borrowing should be exceptional; only for critical high-return projects for which concessional financing is not available. - In countries with lower debt vulnerabilities, minimum concessionality should be 35 percent. - Nonzero limits tied to specific projects, or untied nonzero limits for countries with relatively higher capacity levels in this group, can be contemplated if they do not push a country into higher debt vulnerability category. - Limits for higher capacity countries: - Concessionality requirements do not apply loan by loan. - PV targets can apply to countries with higher debt vulnerabilities and average concessionality requirements to countries with lower debt vulnerabilities. - If sufficient information on timing of external financing operations is available, annual targets can be complemented by semiannual or quarterly guideposts. - Debt limits for advanced LICs: - Concessionality requirements may be dropped altogether. - These countries are expected to have per capita income above the IDA operational cutoff, a strong track record of macroeconomic and public resource management, and sustained past and prospective access to nonconcessional financing. - If debt vulnerabilities remain high, nominal debt ceilings can be considered. ### Payments arrears - Where external or domestic payments arrears exist, quarterly indicative targets or performance criteria may be set for their phased elimination. - The concept of government should be clearly defined (e.g., inclusion of state-owned enterprises or social security and pension funds) and the method for measuring arrears specified. - Domestic arrears measurement and controllability problems may preclude use of such limits as performance criteria. - Judgment on whether limits on domestic arrears should be PCs or indicative targets should consider commitment control, measurement systems, and data quality. ### Continuous performance criteria (PCs) - Continuous PCs always include commitments related to non-introduction of exchange restrictions and multiple currency practices: - Specifically cover: (i) imposition or intensification of restrictions on payments and transfers for current international transactions; (ii) introduction or modification of multiple currency practices; (iii) conclusion of bilateral payments agreements inconsistent with Article VIII; (iv) imposition or intensification of import restrictions for balance of payments reasons. - Continuous PCs are always included in text of all Fund arrangements and, given their non-quantitative nature, usually not listed in the PC table. - Other continuous PCs typically include non-accumulation of external payments arrears. - Where external debt ceilings are set at zero, these should be specified as continuous PC. - Monitoring of continuous PCs relies on staff ascertaining continuous compliance based on representation by the authorities. ### Wage bill ceilings - Use of wage bill ceilings over extended periods should be avoided; require flexibility and clear justification in program documents. - Wage bill ceilings should be used selectively and limited to circumstances when they are designed as short-term measures when first-best options are not available. - Medium-term expenditure frameworks and strengthened budget and payroll systems are preferable and expected to obviate need for wage ceilings over time. - Where substantial technical assistance is needed to develop systems, wage ceilings may be needed in exceptional cases based on macroeconomic considerations. ### Adjustors - Purpose: protect the program from foreseeable shocks beyond authorities’ immediate control by pre-specifying policy responses to deviations from program assumptions without compromising PCs. - Adjustors are automatic and distinct from waivers, modifications of PCs, and adjustments during program reviews. - Design principles for adjustors: - Use sparingly, to limit need for major policy adjustments in face of uncertainty and volatility of key economic variables (e.g., export prices, foreign financing, privatization receipts, or certain policy actions such as bank recapitalization or changes in reserve requirements). - Be simple and clearly defined, including in the TMU and PC table. - Intended for temporary deviations; lasting or large deviations should be addressed in program reviews. - Should be based on realistic projections; e.g., allowing domestic bank financing to compensate for consistent overestimates of external financing may produce an overly relaxed program. *Source: APPENDIX II. QUANTITATIVE CONDITIONALITY.* ### 28. Several technical points apply to the design of adjustors: (a) by convention, adjustors are ### _082714 - 28. Several technical points apply to the design of adjustors: (a) by convention, adjustors are ### Adjustors: technical design points - By convention, adjustors are applied to ceilings/floors set for the PCs rather than to actual outturns. - If several adjustors are applied to the same PC (e.g., for deviations in foreign financing, privatization receipts, and oil prices), they should apply to the net cumulative sum of deviations from the program assumptions for these variables. - Unless the potential shock affects money demand, an adjustor on net international reserves should have a symmetric adjustor (with the opposite sign) on net domestic assets. - It is important to make a distinction between project and program financing. ### Common uses of adjustors - Deviations from projected external program grants and lending (budget/balance of payments support) lead to adjustment of: - the NIR floor, - the NDA ceiling, and - the net domestic financing of the government ceiling. - Deviations from projected external project lending lead to adjustment of the overall fiscal balance floor if applicable (whereas no adjustor is needed if the fiscal deficit concept excludes project financing and expenditures). - Deviations from projected fiscal revenues lead to (usually partial) adjustment in the overall fiscal balance floor or net domestic financing of the government ceiling. - In all cases, it is often useful to apply adjustors symmetrically and apply symmetric caps. ### TMU and adjustor specification - The TMU should define the adjustors in the same way it defines components of PCs, including: - specification of the variables subject to adjustment, - explicit adjustment formulas, - trigger events, - caps, and - thresholds. - The baseline projection for the economic indicator that gives rise to potential adjustment of PCs should be included in the PC table and a footnote should indicate the adjustor mechanism. ### Staff-Monitored Programs (SMPs): purpose and features - SMPs are informal agreements between national authorities and Fund staff to monitor implementation of the authorities’ economic program to establish a track record for: - paving the way for a new Fund financial arrangement, - Fund emergency assistance, - or resumption of an existing arrangement that has gone off track. - SMPs resemble Fund-supported programs in form but: - are not required to meet UCT conditionality standards, - are not endorsed by the Fund’s Executive Board. - In the LIC context, SMPs are typically used when: - Limited institutional capacity, domestic fragility or instability, weak economic policy implementation, or absence of financing assurances raise significant doubts about the country’s capacity and/or commitment to implement a UCT-quality program; - A country’s program supported by a Fund financial arrangement has gone off track and a track record is needed to provide assurances that the authorities have the capacity and commitment to achieve the program’s objectives; - A member country has overdue obligations to the Fund; in these cases, careful examination of a country’s financing situation will be needed in light of a probable subsequent request for a Fund arrangement or for the resumption of an arrangement that has gone off track. ### SMP design and conditionality - SMPs should be designed to build a track record; policies should be sufficiently ambitious to provide a good basis for proceeding to a Fund financial arrangement. - Staff should refrain from reaching an understanding on an SMP if a consistent policy package is not in place. - SMPs should resemble a Fund-supported program in form, including: - specification of a quantified macroeconomic framework, - structural reform agenda, - quantitative benchmarks (normally on a quarterly basis), - structural benchmarks. - For a PRGT-eligible member, the ultimate objective of an SMP is to help a member move to a UCT-quality program aimed at progressing toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - SMPs can, under Board finding, count toward the HIPC decision-point track record when assessed as “SMPs of UCT-quality policies”; this requires Board-supported staff assessment that policies meet UCT-quality standards and satisfactory performance for a sufficient period (in practice, a minimum of six months) since the Board’s initial determination. ### SMPs and arrears / RAP eligibility - For members not eligible for a Rights Accumulation Program (RAP), an SMP with UCT-quality conditionality would qualify only if members have no arrears to the Fund, and, where they have arrears to the World Bank, an agreed financing plan and a timetable for normalizing relations with the Bank are in place. - RAP-eligible members: - would not be required to clear existing arrears to the Fund either prior to or during an SMP, - are expected to remain current on new obligations falling due to the Fund during the SMP; - would need an agreed financing plan and timetable for normalizing financial relations with the World Bank in case of arrears to them. - Some RAP-eligible members emerging from conflict with severely limited payments capacity may be allowed to accumulate new arrears to the Fund during the duration of the SMP to the extent their payments capacity requires it. - SMPs should closely resemble Fund-supported programs in form and choice of indicators to monitor should be similar to those appropriate under an eventual UCT-quality program. ### SMPs and poverty reduction / PRS links - SMP-supported policies should be consistent with the member’s poverty reduction and growth objectives. - Requests for an SMP should be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives, cross-referencing any existing PRSP where relevant. - SMPs should include safeguards on social and other priority spending, such as an indicative floor on social and other priority spending, defined by the authorities, where possible. - If a PRS document exists, SMP-supported policies should be consistent with the PRS objectives in the context of promoting a stable and sustainable macroeconomic environment consistent with strong and durable poverty reduction and growth. - If a PRS document does not exist and the SMP is aimed at building a track record for an ECF arrangement or PSI, staff should alert the authorities on Definitions and Timeliness for PRS Documentation requirements (Appendix V) to ensure adequate time for the PRS process. ### Choice of track record: SMPs, informal track records, and RCF support - Track records are used to provide additional assurances about authorities’ capacity and commitment to implement a UCT-quality program; they should not be used purely for signaling purposes. - Typical uses: - Bring an existing ECF or SCF arrangement, or PSI, back on track. - Pave the way for a prospective new ECF-, SCF- or PSI-supported program when doubts exist about capacity/commitment. - Distinction from prior actions: - Prior actions ensure implementation of measures immediately critical to underpin upfront implementation; they may be necessary for starting or continuing an SMP. - Three types of track records for PRGT-eligible members: - Informal track records: time-bound near-term policy actions and targets, agreed informally between staff and authorities; require interdepartmental review and management clearance (typically based on a PN). - SMPs: formal monitoring as detailed above. - RCF-supported policies: typically involve time-bound indicative targets and structural benchmarks specified at the time of the request for an RCF disbursement. - Appropriateness: - Informal track records: when reasonable near-term prospects exist that authorities will implement a UCT-quality program or take near-term corrective policy actions. - SMPs: when significant uncertainty exists about authorities’ capacity and commitment and there is no urgent financing need warranting RCF. - RCF support: when a member experiences an urgent financing need caused by a sudden exogenous shock and there are adequate safeguards to the Fund’s resources; access to RCF is not possible if the member has overdue obligations to the Fund and requires safeguards assessments and audit access conditions. ### Track record period - SMP track record period can vary based on past track record and measures needed; normally: - minimum of six months and two test dates, - would not be expected to extend beyond 18 months, - longer durations are not precluded. - Track records for the RCF would normally cover at least six months. - Duration for informal track records is more flexible and depends on country circumstances. - Track record periods should start no earlier than the first time substantive policy discussions on near-term macroeconomic targets were held between the country team and the authorities, based on management approval of the policies and track record period (e.g., in a Policy Note). - Track record periods should not start much later than the time staff and authorities reach understandings on the specifics of the track record. ### HIPC Initiative and MDRI: summary of key elements - The HIPC Initiative was launched in 1996, enhanced in 1999, and supplemented in 2005 by the MDRI. - The list of countries potentially eligible for HIPC relief was ring-fenced in 2006 and in 2010, comprising PRGT-eligible countries pursuing or program supported by the IMF by October 1, 1996 or having adopted such a program between October 1, 1996 and December 31, 2006, who have received or are eligible to receive assistance to the full extent available under traditional debt relief mechanisms, whose debt ratios at end-2004 and end-2010, after the hypothetical application of traditional debt relief mechanisms, were assessed to have exceeded the HIPC Initiative debt thresholds. - To qualify for HIPC debt relief a member’s present value (PV) of external public and publicly-guaranteed debt based on end-2004 and end-2010 data must exceed: - 150 percent of exports or - 250 percent of revenue. - The fiscal revenue threshold only applies if exports to GDP are at least 30 percent and revenue to GDP 15 percent. - To reach the HIPC decision point the following conditions must be met: - The country’s debt burden indicators must be above the HIPC Initiative debt sustainability thresholds based on the most recent data for the year immediately prior to the decision point. - While the HIPC Trust Instrument states that normally a three-year track record of policy performance under a Fund-supported program immediately preceding the decision point is needed, in practice a track record with a minimum of six months’ duration has been required. - Programs that count toward qualification include those supported by ECF, SCF, or Extended Arrangements, or, on a case-by-case basis as determined by the Board, SBA, RAP, RFI and RCF. - Under the Rights Accumulation Program “RAP,” a member in arrears to the Fund will be able to earn rights, conditioned on satisfactory performance under an adjustment program monitored by the Fund, toward a disbursement from the Fund once the member’s overdue obligations have been cleared and upon approval of a successor arrangement by the Fund. - Somalia and Sudan are the only two remaining countries that are eligible for the RAP. - An SMP can count toward the track record when the Executive Board agrees that its macroeconomic and structural policies meet the policy standards associated with programs supported by UCT arrangements or under the PRGT. Liberia was the only country thus far to have used an SMP to reach the decision point. - A satisfactory poverty reduction strategy set out in a PRSP, I-PRSP, PRSP preparation status report or APR must be in place and must have been subject to an analysis in a JSAN also issued to the Executive Board. - The PRS document must have been issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months. *Source: _082714 - 28. Several technical points apply to the design of adjustors: (a) by convention, adjustors are (IMF PDF).* ### 3. A country that has reached decision point may begin receiving interim HIPC assistance ### 3. A country that has reached decision point may begin receiving interim HIPC assistance ### Decision point and interim HIPC assistance - Interim HIPC assistance may begin once a country has reached decision point, subject, inter alia, to: - the existence of satisfactory participation assurances from creditors (in practice, assurances from creditors jointly holding at least 70 percent of HIPC-eligible debt); and - the requirement that the Fund-supported program remains on track in order for interim assistance to be disbursed. - A country may receive up to 20 percent (in NPV terms) of total assistance committed for each 12-month period following the decision point and up to 60 percent of the total of the assistance committed prior to completion point (or 25 percent and 75 percent, respectively, in exceptional circumstances). ### Conditions for reaching the HIPC completion point and Trustee disbursement - To reach the HIPC completion point, when the Trustee decides to disburse remaining undisbursed assistance committed for a qualifying member (together with any MDRI or MDRI-like relief), the following conditions must be met: - A track record of at least six months of policy performance under an ECF, SCF, or Extended Arrangement has been established in the period immediately preceding the completion point. - The member has a stable macroeconomic position. - A full PRSP must have been adopted and satisfactorily implemented for at least one year preceding the completion point, as evidenced by an APR issued to the Executive Board and subject to a JSAN. - The APR must have been issued normally within the previous 12 months but in any case within the previous 18 months. - The JSAN must also have been issued to the Executive Board. - All floating completion point triggers, the structural conditions set at the decision point, must have been implemented. - Satisfactory participation assurances from creditors (in practice, assurances from creditors jointly holding at least 80 percent of HIPC-eligible debt) should have been obtained. ### Program documentation and reflection of HIPC progress - Progress under the HIPC Initiative by a country should be adequately reflected in program documents. Program documents are expected to contain: - information on the status of preparation or implementation of an I-PRSP/PRSP; - implementation of the completion point triggers; - the possible timing for reaching the completion point and any obstacles toward it. - Separate documents are prepared for both the decision point and the completion point. ### HIPC debt relief analysis (HIPC DRA) and planning - Preparation for the HIPC Initiative decision and completion points requires careful planning, including: - An HIPC debt relief analysis (HIPC DRA) based on a loan-by-loan data reconciliation needs to be conducted. - The HIPC DRA determines the member’s current external debt situation and is a joint exercise among SPR and World Bank staff and, where appropriate, the relevant regional development bank, which dispatch a mission to the country to perform the data reconciliation. - The entire process of conducting the HIPC DRA and preparing an HIPC document may take between 18 and 24 weeks from pre-mission preparation to Board meeting. - The HIPC DRA should not be confused with the LIC DSA, which is undertaken annually jointly by Bank and Fund staff and employs a different methodology. ### Treatment of prospective debt relief in macro frameworks vs. HIPC DRA - The treatment of prospective debt relief may differ between the macro framework and the HIPC DRA because: - The macro framework is expected to reflect realistic assumptions, including prospects for debt relief. - The HIPC DRA should reflect the legal situation regarding debt and demonstrate the unsustainable debt burden before debt relief. ### Multilateral Debt Relief Initiative (MDRI) - The HIPC Initiative was supplemented in 2005 by the Multilateral Debt Relief Initiative (MDRI), which: - is to provide 100 percent debt relief on eligible debt to eligible countries, including HIPC-eligible countries that have reached the HIPC completion point and whose performance since reaching the completion point has not deteriorated substantially. - is provided by four IFIs—the IMF, IDA, AfDB, and IADB. - A member is eligible for assistance under the MDRI-I Trust when the member: - is PRGT-eligible; - has annual per capita income of US$380 or less on the basis of the 2004 gross national income (Atlas method) from the World Bank’s Operational Manual as updated on July 21, 2005; - has debt outstanding to the Fund, including to the Fund as Trustee, as of December 31, 2004; - and in the case of a member that is HIPC eligible or potentially eligible, the member has reached the completion point under the HIPC Initiative. - Questions on the HIPC Initiative and the MDRI should be addressed to SPR’s Debt Policy Division. --- ### Appendix V — Poverty Reduction Strategy: Background and integration into Fund operations - Key Board decisions and timelines: - On January 27, 2009, the Executive Board approved amendments to the PRGF-ESF Trust Instrument and to the Policy Support Framework Decision to streamline procedures related to PRS documents and JSANs. - On July 23, 2009 (effective January 7, 2010) the Board approved changes to the architecture of the IMF’s concessional facilities for LICs, including renaming PRGF-ESF Trust as PRGT and providing three concessional facilities: the ECF, the SCF, and the RCF. - On April 8, 2013, the Board approved changes to the initial duration and extension of ECF arrangements; the timing of reviews, phasing and performance criteria for ECF and SCF arrangements; augmentation procedures; computation of the period of SCF arrangements treated as precautionary; provisions on defunct ECF arrangements; and PRS documentation requirements for ECF arrangements. Amendments were also made to lapse-of-time procedures; access limits under PRGT facilities; and the duration, timing of reviews, assessment criteria, and required PRS documentation for the PSI. - As part of these changes, the preexisting requirement to issue JSANs on PRSPs and I-PRSPs for Board discussion was changed to allow issuance for information. - Purpose of Appendix V: - Provides guidance on integrating poverty reduction objectives into LIC operations, including rules and procedures for PRS documents and implications for operations under ECF, SCF, RCF, PSI and HIPC Initiative processes. - Focuses on processes rather than detailed content expectations. - Changes to staff assessments and PRS procedures: - JSANs for APRs have been eliminated; assessments of PRS implementation will now take the form of staff participation in an AFP with country authorities and other stakeholders, with the outcome summarized as part of a subsequent regular staff report to the Executive Board. - JSAN and PRS requirements in connection with the enhanced HIPC Initiative remain unchanged. ### Integrating country poverty reduction efforts into concessional lending activities - Objectives and documentation requirements: - The ECF, SCF, RCF and the PSI are designed to assist LICs in achieving or maintaining a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Policies supported by Fund concessional financing should be aligned with the country’s poverty reduction and growth objectives. - Specific guidance on PRS linkages: - Any financing request or program review under the ECF, SCF, or RCF must be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives. - If a PRS document exists, the policies supported by the ECF, SCF, RCF, or PSI should be consistent with the objectives of the PRS in the context of promoting a stable and sustainable macroeconomic environment consistent with strong and durable poverty reduction and growth. - If a relevant PRS document does not exist, program documentation should outline the country’s medium-term poverty reduction and growth objectives and policies; subsequent program documents should refer to and update this documentation as necessary. - While a PRS document is not required at the time of initial Board consideration of an ECF arrangement or a PSI, the second (and every subsequent) review can only be completed if either: - (a) a PRS document has been issued to the Board, normally within the previous 18 months, and has been subject to staff analysis, including a staff report on an initial request for an ECF arrangement or PSI or on a review, or - (b) the member has a poverty reduction strategy set out in a PRSP that has been issued to the Board and which covers a period of twelve months from the date of the completion of the relevant review and the member’s program documents describe how the current fiscal budget, the upcoming fiscal budget when available, and planned structural reforms advance PRS implementation. - Staff should inform authorities at an early stage about Definitions and Timelines for PRS Documentation to ensure adequate time for the PRS process. - Staff are required to prepare and circulate for discussion or information to the Executive Board a JSAN for PRSPs and I-PRSPs generally within four months of transmission of a PRSP or an I-PRSP (outside the HIPC context). - Where a JSAN has not yet been prepared, the Executive Board is not prevented from making decisions governing a member’s ECF arrangement or PSI, including completion of reviews, if the required staff analysis has been included in the relevant staff report or a supplement. - IMF country teams are encouraged to coordinate with the World Bank to ensure simultaneous external publication of JSANs when relevant. - PRS documents should normally be produced by country authorities on a 12-month cycle and aligned with other domestic policy cycles. - Social and priority spending: - Under all Fund facilities for LICs, social and other priority spending should be safeguarded and, whenever appropriate, increased. - This should be monitored through explicit targets, typically an indicative floor on social or other priority spending, whenever possible. - Determination of social or other priority spending should generally be based on the authorities’ PRS, or where that does not exist, the medium-term poverty reduction and growth objectives outlined by the authorities in program documentation. - Members will be encouraged to develop adequate expenditure tracking systems where tracking is not feasible; technical assistance may be required. - Handling inconsistencies between PRS and other national documents: - Staff must consider implications of inconsistencies between PRS documents and policies that could be supported by a Fund arrangement, including implications for program ownership or implementation. - If inconsistencies result from differing vintages, authorities should explain timing differences and modifications, and the next PRS should discuss these modifications. - If PRS documents differ substantially from contemporaneous national policy documents, IMF staff teams must evaluate whether a Fund-supported program remains appropriate and discuss inconsistencies as part of the AFP. - Where proceeding with an ECF-supported or PSI program despite inconsistencies, the LOI/MEFP should explain how authorities intend to modify policy coordination procedures to ensure alignment with future PRS documents. - Missions should urge authorities to improve internal coordination mechanisms but should not directly set conditions for the contents of PRS documents. - Reporting and safeguards in program documentation: - ECF or PSI staff reports and LOIs/MEFPs should discuss how significant weaknesses in the poverty reduction strategy, including those identified in the JSAN or through the AFP, have been addressed. - In recommending approval of an ECF loan disbursement, IMF staff and management would base their recommendation in part on the country’s PRS, taking into account the JSAN and the authorities’ commitment to remedy major weaknesses in areas under the IMF’s mandate (in particular, the macroeconomic framework). *Source: _082714 - 3. A country that has reached decision point may begin receiving interim HIPC assistance* ### 9. The authorities of low-income countries are generally expected to produce PRS documents, ### _082714 - 9. The authorities of low-income countries are generally expected to produce PRS documents, ### PRS documents and timing - Low-income country authorities are generally expected to produce PRS documents, including PRSPs and APRs. - Forms and definitions of PRS documents are set out in the PRGT Instrument, the PSI Framework Decision, and the PRG-HIPC Trust. - Normal production cycle: - PRS documents should normally be produced on a 12-month cycle and aligned with other domestic policy cycles. - The revised PRGT Instrument and the PSI Framework Decision establish a normal limit of 18 months between the time of issuance of a PRS document to the Fund Board and the Board completion of the second and subsequent reviews on a subsequent ECF or PSI operation. ### Appendix Box 1 — Poverty Reduction Strategy Documents (definitions) - Interim Poverty Reduction Strategy Paper (I-PRSP): - A transitional document setting out a preliminary poverty reduction strategy as a precursor to a first full PRSP. - Use of I-PRSPs will be eventually phased out; countries cannot have I-PRSPs subsequent to full PRSPs. - PRSP Preparation Status Report: - Reports updates to the preliminary poverty reduction strategy set out in an I-PRSP in anticipation of a PRSP. - Poverty Reduction Strategy Paper (PRSP): - Prepared in a participatory process; sets out a comprehensive three-year poverty reduction strategy and assesses poverty determinants and the links between public actions and poverty outcomes. - Presents outcome-related goals for poverty reduction and proposes integrated multiyear institutional, structural, and sectoral interventions within a consistent macroeconomic framework. - The poverty reduction strategy could be extended to as much as five years. - Annual Progress Report (APR): - Reports on implementation of the PRSP and updates it as appropriate. ### Reporting to the Board and staff reporting practice - Staff should report to the Board on each country’s PRS about once a year. - Such reporting should cover progress in the PRS (and, when applicable, PRSPs and their JSANs or the AFP) and be presented in a staff report (e.g., an Article IV staff report, or a staff report for approval of a new ECF, SCF, or SCF arrangement, disbursement under the RCF or approval of a PSI, or for the completion of a program review). - For a PRSP preparation status report, the staff report should: - Briefly highlight progress and constraints in preparing the PRSP. - Discuss the feasibility of the roadmap for its completion. - Possibly provide advice on further steps including recommendations for technical assistance. ### Joint Staff Advisory Notes (JSANs) - Purpose: - Prepared jointly by the staffs of the Bank and the Fund containing an analysis of strengths and weaknesses of the member’s poverty reduction strategy and identifying priority areas for strengthening during implementation. - For an I-PRSP, the JSAN should focus on the roadmap for preparing the strategy, provide advice on preparations, and consider the need for technical assistance. - Key objectives and tone: - Provide focused, frank, and constructive feedback to country authorities. - Identify a limited number of priority areas in the PRS expected to be addressed, including in the context of existing or possible future ECF-supported programs. - Avoid normative language assessing whether the PRS meets or falls short of overall standards. - Concluding guidance for JSANs discussed by Boards: - End with suggested points for discussion by the Executive Boards of the Fund and the Bank. - Concluding paragraph should highlight areas for discussion and seek Boards’ views on staff conclusions regarding: - (i) priority action areas for strengthening the PRS; and - (ii) areas where (a) there are inconsistencies between the PRS and its policy framework and the analytical basis that underpins Bank- and Fund-supported programs that reflect existing analysis; or (b) further analysis is needed or adjustments to the strategy are expected. - Preparation responsibilities: - Bank and Fund staffs should divide responsibilities in preparing the JSAN according to primary institutional competencies, accounting for overlapping competencies and linkages. - Exceptions: - No JSAN is needed for PRSP preparation status reports and APRs; feedback will be provided through the AFP. - Exception: a JSAN is required when a PRSP preparation status report or APR is prepared for the HIPC decision point. ### Annual Feedback Process (AFP) - Nature: - An assessment of PRS implementation based on informal consultations and dialogue with country authorities. - Conclusions summarized as part of a regular staff report to the Executive Board (e.g., Article IV discussion, or program request or review). - Expected consultation coverage: - (i) performance relative to PRS benchmarks and monitoring indicators; - (ii) linkages between the PRS and national systems and processes (e.g., budget, monitoring, and planning); - (iii) the coming year’s policy intentions, particularly as reflected in the budget. - Coordination and modalities: - AFP should be coordinated with Bank staff to ensure comprehensive and coherent feedback, though Bank and Fund staffs could provide input individually. - Fund staff expected to focus on macro-critical aspects of the PRS. - Bank and Fund staff not required to provide separate written feedback to the government; they may choose the most conducive mechanism to convey views. - Policy Consultation Notes should indicate that feedback will be provided in the context of the forthcoming mission, where applicable. - Content and modalities of feedback are not subject to special clearance procedures; feedback may be written or oral. - Any written comprehensive assessments of the macroeconomic situation, if provided, would be circulated to the Executive Board for information, consistent with the policy on assessment letters and statements. - Use of in-country mechanisms and timing: - AFP should draw on existing in-country mechanisms (implementation reviews, domestic review processes, annual reviews of budget financing groups and consultative groups/roundtables). - Timing is country specific; feedback should ideally be given about once a year, ideally in line with the budget calendar and in-country donor review process. - In countries with weak policy environments, or in the absence of program relationships, staff ability to provide feedback may be limited. ### PRS and the HIPC Initiative - No change to operational link between PRS and HIPC Initiative. - Fund staff will recommend approval of an operation under the HIPC Initiative if PRS requirements for HIPC decisions set out in the PRG-HIPC Trust Instrument are met. - Completion point requirement: - Requirement for satisfactory implementation of a full PRSP for at least a year, evidenced by an APR recently issued to the Board and analyzed in a JSAN also issued to the Board. - Executive Boards’ determinations as to whether HIPC decision point and completion point conditions related to members’ PRS are met will be made at the time of the decision and completion points rather than at the time the JSAN is submitted to the Boards. ### Appendix Box 2 — Summary of PRS-Related Conditions for Assistance Under the HIPC Initiative - Decision point: - A member should have in place a satisfactory PRS set out in an I-PRSP, PRSP preparation status report, PRSP or APR that has been issued to the Board normally within the previous 12 months but in any case within the previous 18 months, and which has been analyzed in a JSAN that has also been issued to the Board. - Completion point: - A member should have in place a PRSP with at least one year of satisfactory implementation by the completion point. - Evidence should be provided in an APR normally issued to the Executive Boards within the previous 12 months but in any case within the previous 18 months and analyzed in a JSAN that has also been issued to the Board. ### Other issues — circulation, Board discussion, and publication - Circulation to the Boards: - PRS documents and corresponding JSANs are issued to the Executive Board in the EBD series as soon after the PRS documents are officially received (with a notification from a senior official indicating the document is final and can be issued to the Executive Boards and posted on external websites). - A PRSP or I-PRSP will be issued together with the accompanying JSAN for Board discussion when feasible. If JSAN is not ready, issuance of the PRS document should not be held up. - If JSAN cannot be issued together with PRS, the JSAN should be issued to the Boards within four months of official transmission of the PRS document to which it relates. - JSANs can be issued for discussion or information to the IMF Executive Board. APRs are normally issued for information. - Board discussion sequencing and circulation periods: - Boards will either discuss a PRSP or I-PRSP (and related JSAN) together with a concessional financing, PSI, or HIPC Initiative operation, or an Article IV consultation, whichever is earlier, or on a standalone basis if no such operation is contemplated. - Executive Board discussions at the Bank and the Fund should preferably be scheduled within five working days of each other. - The institution taking an operational decision would normally have the later Board date. - The Fund’s minimum circulation period for PRS documents and JSANs is two weeks, with an additional business day required for document dissemination. - The Bank generally requires a three week circulation period and additional time for document preparation. - Standalone Board discussion of a PRSP or I-PRSPs at the Fund would only be expected in unusual circumstances where there is an operational need at the Bank but not at the Fund. - I-PRSPs should be finalized and issued to the Boards only when there is an operational need at either the Bank (rarely) or the Fund. - APRs and PRSP preparation status reports are not normally scheduled for Board discussion. - Publication: - Publication of PRS documents and JSANs is voluntary, but presumed.250 - A member’s consent is required for publication. - The Managing Director will not recommend approval of: - (i) an ECF arrangement or completion of a review under such arrangement, - (ii) an HIPC decision point or completion point decision, or - (iii) a member’s request for initial approval or review of a PSI, - if the member does not explicitly consent to publication of the PRSP-related document (I-PRSP, PRSP, PRSP preparation status report, or PRSP APR). - A member is expected to indicate intent to consent to publication before the Board meeting or date of adoption of a decision on a lapse-of-time basis. - If consent has not been received prior to circulation to the Board, the cover memo should indicate this using standardized wording similar to that for staff reports. - When consent has been received, PRSPs and APRs may be published immediately after formal transmission to the Bank and the Fund when circulated for information. - JSANs and PRSPs scheduled for discussion by one or both Boards may be published only after discussion by the relevant Board(s). - Where modifications are introduced to the JSAN before publication, the JSAN cannot be posted on the Fund’s website until both the Fund’s and Bank’s Board have been formally informed of these changes. - A Chairman’s statement will also be released after the Board meeting as part of a press release.251 ### Appendix VI — PRGT eligibility (overview of policy framework and criteria) - Policy framework: - Set out in Eligibility to Use the Fund’s Facilities for Concessional Financing (IMF, 2009k) and Executive Board Decision No. 14521-(10/3), adopted January 11, 2010, as amended pursuant to IMF (2012b and 2013c). - PRGT eligibility reviewed by the Executive Board every two years, with the next review scheduled for 2015. - Decisions regarding entry onto or graduation from the PRGT-eligibility list can be adopted between reviews. - Key elements: a. Entry criteria: - A Fund member will be added to the list of PRGT-eligible countries if: - (i) its annual per capita gross national income is below the operational IDA cut-off (based on the latest available qualifying data);252 and - (ii) the sovereign does not have capacity to access international financial markets on a durable and substantial basis as defined below. b. Graduation criteria: - A PRGT-eligible country will graduate if it meets either or both the income and market access criteria, and does not face serious short-term vulnerabilities: - Income: - The country’s annual per capita GNI: - (a) has been above the IDA operational cutoff for at least the last five years (for which qualifying data are available); - (b) has not been on a declining trend in the same period (comparing the first and the last relevant annual data); and - (c) is currently (based on the latest available qualifying data) at least twice the operational IDA cutoff. - Or - Market Access: - The sovereign has the capacity to access international financial markets on a durable and substantial basis,253 and their annual per capita GNI is above the IDA operational cutoff (based on the latest available qualifying annual data) and has not been on a declining trend during the last five years for which qualifying data is available, comparing the first and last relevant data available. - And - Absence of short-term vulnerabilities: - In addition to meeting at least one of the above two criteria, the country must not face serious short-term vulnerabilities. - Assessment requires absence of risks of a sharp decline in income, or of a loss of market access, and limited debt vulnerabilities as indicated by the most recent debt sustainability analysis, as well as confirmation that overall debt vulnerabilities since the most recent debt sustainability analysis remain limited. - For members with a LIC-DSA, they should have a risk of external debt distress that is moderate or less, and the level of domestic debt should not raise serious concerns regarding debt sustainability. - For assessment of risks of a loss of market access, large spreads on recent external borrowing could indicate risks to prospective market access. c. Small and very small (microstate) country criteria: - Criteria for small countries and microstates mirror general rules but are less stringent as regards per capita income. - Small countries defined as population below 1.5 million. - Microstates defined as population below 200,000. - Exceptional treatment operationalized as follows: - Entry: - Small countries (microstates) not currently PRGT-eligible will be added to the PRGT eligibility list if: (i) the sovereign does not have capacity to access international financial markets on a durable and substantial basis, and (additional operational rules apply as described in the policy). - Notes on data and measurements: - Assessments of per capita GNI for entry and graduation decisions would normally be based on World Bank data derived using the Atlas methodology, but other data sources may be used in exceptional circumstances (e.g., data estimated by Fund staff in the absence of World Bank data). - Qualifying data: data in respect of which the most recent observation relates to a calendar year that is not more than 30 months in the past at the time of the assessment. - For FY2015, the operational cut-off for IDA eligibility is US$1,215, based on 2013 GNI income per capita. - Market access measurement (footnote detail): - The market access criterion is measured under one of two alternative tests. Under the first test, evidence of capacity would normally be: - public sector issuance or guaranteeing of external bonds or disbursements under public and publicly guaranteed external commercial loans in international markets during at least two and three of the last five years (for which data are available) for entry and graduation, respectively, in a cumulative amount over that period equivalent to at least 50 and 100 percent of the country’s Fund quota, for entry and graduation, respectively, at the time of the assessment. - As an alternative, a country could be deemed to meet the market access criterion if convincing evidence exists that the sovereign could have tapped international markets on a durable and substantial basis, even if actual borrowing fell short of specified thresholds; this would be a case-specific assessment considering volume and terms of recent actual borrowing and sovereign credit rating. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_082714.pdf* ### APPENDIX VI. PRGT ELIGIBILITY ### APPENDIX VI. PRGT ELIGIBILITY ### Eligibility criteria (excerpt) - Members are eligible if they have per capita GNI less than twice (five times) the IDA operational threshold (based on the latest available annual qualifying data). - Access to international financial markets on a durable and substantial basis is considered as defined in paragraph 1b above. ### Graduation: Small countries (microstates) - Graduation is based on three criteria: - Income: - Annual per capita GNI: (i) has been above the IDA operational threshold for at least the last five years (for which qualifying data are available); - (ii) has not been on a declining trend in the same period (comparing the first and the last relevant annual data); and - (iii) is currently at least three (six) times the IDA threshold (based on the latest available qualifying data); - Market access: - The sovereign has the capacity to access international financial markets on a durable and substantial basis, as defined in paragraph 1b above, and the member’s annual per capita GNI is above the IDA operational cutoff (based on the latest available qualifying data) and has not been on a declining trend during the last five years for which qualifying data is available, comparing the first and last relevant data available; - Absence of serious short-term vulnerabilities: - Small countries (microstates) that meet either of the above two criteria will graduate if they do not face serious short-term vulnerabilities as described in paragraph 1b above. - With respect to the risk of a sharp decline of income, a small country (microstate) generally would not be expected to graduate if there is a serious risk of a decline in income to less than three (six) times the operational IDA cutoff. ### Appendix Table 4. PRGT-Eligible Countries—2011 Per Capita GNI (US dollars) (Effective July 1, 2013) - Sources: Fund WEO, World Bank, World Development Indicators, and OP 3.10, Annex C, of July 2014. - Legend: - * Maintained on the list due to short-term vulnerabilities. - ** Maintained on the list because it satisfies the small country exception. - *** Added or maintained on the list because it satisfies the micro state exception. - 1/ Data for 2013 are not available. 2009 data given for Djibouti. - 2/ Zimbabwe is not PRGT-eligible due to its removal from the PRGT-eligibility list by a Board decision in connection with its overdue obligations to the PRGT. It is expected to become PRGT-eligible if the remedial measure were lifted. - 3/ The source of South Sudan population is World Development Indicators, and the sources of other countries are Fund WEO. - Country entries (Country — GNI per capita (US$) — Population (In millions)): - Afghanistan — 700 — 30.6 - Bangladesh — 900 — 156.6 - Benin — 790 — 10.3 - Bhutan — 2,430 — 0.7 - Bolivia — 2,550 — 11.0 - Burkina Faso — 670 — 16.9 - Burundi — 280 — 9.0 - Cambodia — 950 — 15.1 - Cameroon — 1,270 — 22.0 - Cape Verde** — 3,630 — 0.5 - Central African Republic — 320 — 4.6 - Chad — 1,020 — 11.0 - Comoros — 880 — 0.7 - Congo, Rep. — 2,660 — 4.2 - Congo, Dem. Rep. — 400 — 77.0 - Côte d'Ivoire — 1,380 — 24.1 - Djibouti — 1,270 1/ — 0.9 - Dominica*** — 676 — 0.1 - Eritrea — 490 — 6.3 - Ethiopia — 470 — 88.9 - Gambia, The — 510 — 1.9 - Ghana* — 1,760 — 25.6 - Grenada* — 746 — 0.1 - Guinea — 460 — 11.1 - Guinea-Bissau — 520 — 1.7 - Guyana** — 3,750 — 0.8 - Haiti — 810 — 10.3 - Honduras — 2,200 — 8.1 - Kenya — 930 — 41.8 - Kiribati — 262 — 0.1 - Kyrgyz Republic — 1,200 — 5.6 - Lao PDR — 1,460 — 6.8 - Lesotho — 1,550 — 1.9 - Liberia — 410 — 4.1 - Madagascar — 440 — 23.0 - Malawi — 270 — 17.1 - Maldives* — 5,610 — 0.3 - Mali — 670 — 16.9 - Marshall Islands*** — 4,200 — 0.1 - Mauritania — 1,090 — 3.7 - Micronesia*** — 3,440 — 0.1 - Moldova — 2,440 — 3.6 - Mongolia — 3,530 — 2.9 - Mozambique — 590 — 25.8 - Myanmar NA 1/ — 64.2 - Nepal — 730 — 27.9 - Nicaragua — 1,780 — 6.1 - Niger — 410 — 16.6 - Nigeria — 2,760 — 169.3 - Papua New Guinea — 2,010 — 7.3 - Rwanda — 620 — 10.8 - Samoa*** — 3,430 — 0.2 - São Tomé and Principe — 1,470 — 0.2 - Senegal — 1,070 — 14.1 - Sierra Leone — 680 — 6.1 - Solomon Islands — 1,610 — 0.6 - Somalia NA 1/ — 0.0 - South Sudan — 1,120 — 11.3 3/ - St. Lucia*** — 709 — 0.2 - St. Vincent and the Grenadines — 658 — 0.1 - Sudan — 1,130 — 34.4 - Tajikistan — 980 — 8.1 - Tanzania — 630 — 46.3 - Timor-Leste** — 3,580 — 1.2 - Togo — 530 — 6.8 - Tonga*** — 449 — 0.1 - Tuvalu*** — 651 — 0.0 - Uganda — 510 — 36.8 - Uzbekistan — 1,900 — 30.2 - Vanuatu** — 3,120 — 0.3 - Vietnam* — 1,730 — 89.7 - Yemen — 1,330 — 26.7 - Zambia — 1,480 — 14.5 - Memorandum Item: - Zimbabwe — 820 2/ — 13.1 *Italic source attribution:* International Monetary Fund — excerpt from "APPENDIX VI. PRGT ELIGIBILITY" (table and accompanying text). --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_082714.pdf_