## _012016 - Executive Summary (Review of Access Limits and Surcharge Policies) ## Source details **Canonical URL:** [_012016 - Executive Summary (Review of Access Limits and Surcharge Policies)](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_012016.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_012016.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_012016.pdf.json) --- ### Scope and strategic context - Reviews access limits and surcharge policies in the Fund’s General Resources Account (GRA). - Builds on May 2014 Executive Board discussion and on the 14th Review quotas expected early in 2016, which will on average double individual members’ quotas. - May 2014: most Directors supported a moderate increase in normal access limits in SDR terms and merit in adjusting the surcharge threshold to allow a moderate increase in the SDR value of credit not subject to the charge. ### Staff access proposals and rationale - Proposed normal access limits (applying to members whose quota doubles under the 14th Review): - Annual access limits: 140 percent of quota. - Cumulative access limits (net of scheduled repurchases): 420 percent of quota. - Rationale: a 40 percent increase in SDR terms would broadly restore normal Fund access to 2009 levels relative to average global GDP, trade and non-FDI external liabilities, while preserving exceptional access framework rigor. - PLL-specific access: - Halve PLL-specific access limits in percent-of-quota terms once 14th Review quotas become effective (mirroring RFI-specific changes adopted July 2015). - Specific PLL caps proposed: cumulative PLL cap from 1000 percent to 500 percent of quota (net of scheduled repurchases); annual/time-limited phasing for one- to two-year and six-month PLLs as described. ### Surcharges — level- and time-based proposals - Maintain surcharge rates: - Level-based surcharge: 200 basis points. - Time-based surcharge (additional): 100 basis points. - Level-based surcharge threshold options (SDR/percent-of-quota terms): - 175 percent of new quota (staff recommends 175 percent). - 200 percent of new quota. - Impacts on Fund income (assuming February 1, 2016 quota increases) over FY2016–25: - Moving threshold to 175 percent: loss of income of roughly SDR 260 million compared with a 150 percent threshold. - Moving threshold to 200 percent: loss of income of roughly SDR 500 million compared with a 150 percent threshold. - Time-based surcharge proposal: - Extend trigger for EFF outstanding credit from 36 months to 51 months to better align with repurchases under extended arrangements (repurchases start at 54 months under extended arrangements). - Drawback: could incentivize requests for extended arrangements over SBAs; mitigation: facility choice must be based on analysis of balance of payments problems and qualification criteria. - Income implications: - Under the 175 percent threshold, extension to 51 months: minimal income loss due to grandfathering. - Under the 200 percent option, extension to 51 months: additional SDR 75 million reduced income over FY2016–25. - Updated corrected estimate (Decision to establish threshold of 187.5 percent and lengthen EFF time-based threshold to 51 months): projected cost to the Fund SDR 489 million over FY2016–25 (March 28, 2016 supplement corrected methodology). ### Commitment fee thresholds proposal - Moderate SDR increases in commitment fee thresholds, within the surcharge threshold range: - Candidate percent-of-14th-Review-quota lower threshold: between 115 and 135 percent (staff recommends 115 percent). - Candidate higher threshold: between 575 and 675 percent (staff recommends 575 percent). - If effective on February 1, 2016, portion of commitment fees to be refunded for current precautionary arrangements: about SDR 30–35 million. - Projected income impact if effective on February 1, 2016: reduction in commitment fee income about SDR 30-35 million. ### Article IV consultation cycle and Post-Program Monitoring (PPM) - Proposed changes to quota-based thresholds: - Quota-based threshold above which a member may not be placed on an extended Article IV consultation cycle: change from 200 percent of current quota to 140 percent of quota (transitional texts later propose variants such as 145 percent). - Threshold for expectation of PPM: halve from 200 percent to 100 percent of new quotas as a transitory measure ahead of a forthcoming PPM framework paper. ### Effectiveness, timing, and grandfathering - Proposals on new access limits and quota-based thresholds for Article IV cycles and PPM: effective when general conditions for the 14th Review quota increases are met. - Changes to level-based surcharges and commitment fees: effective for each member - (i) once the member pays its quota increase under the 14th Review; or - (ii) at the end of the 30-day Quota Payment Period after general conditions for effectiveness are met, whichever comes first. - Extension of the time-based surcharge for extended arrangements: proposed to take effect immediately upon adoption of the relevant Board decision. - Limited grandfathering proposed for members affected by changes to access, surcharges and commitment fee policies; specific grandfathering mechanics described for surcharges and commitment fees (member election options and end of election upon augmentation/new access). ### Trends, concentration, and usage of GRA resources — key statistics - Quotas and credit stocks: - Post-14th Review quotas expected to double overall to SDR 477 billion; individual quota increases range from 39 to 220 percent. - GRA credit outstanding peaked at around SDR 94 billion in 2012, declined to SDR 51 billion by end-2015. - Total early repurchases in FY2014–15 and so far in FY2016 exceed SDR 25 billion. - Credit concentration remains high: the five largest borrowers hold nearly 90 percent of total GRA credit outstanding; the single largest borrower holds more than 30 percent. - Access metrics and trends (selected): - Number of active GRA arrangements: 28 during 2010–12; since 2012 number dropped to 25 (above the average of 16 in the 3-year period preceding the crisis). - New arrangements averaged seven per year during 2013–15. - Median access of the four largest euro area programs (2010–12): about 2,300 percent of quota (SDR 23.7 billion). - Median access rose from 50 percent of quota (1995–2007) to 300 percent of quota (post-crisis years). - Average access for SBAs and extended arrangements: around 125 percent of quota (1995–2007) to around 540 percent of quota (2008–15). - Median duration of SBAs: 15 months (1995–2007) to 24 months (2008–15). - Share of extended arrangements under EFF: about 8 percent (2000–09) to 35 percent (2010–15). - FCL/PLL instruments: - Four current FCL/PLL arrangements have average access around 820 percent of quota, representing potential call close to SDR 70 billion (22 percent of the Fund’s forward commitment capacity). - Taking FCL/PLL into account, access levels in the GRA during 2010–15 averaged 675 percent of quota. ### Risk management role of access limits (Box 2 highlights) - Access limits balance: - Provide confidence on the scale of possible Fund financing and preserve Fund liquidity and revolving resources. - Annual limits signal normal 12-month support and discourage excessive reliance on Fund financing. - Cumulative limits protect Fund liquidity and reduce exhaustion risk. - Access limits function as thresholds that trigger exceptional access policy requirements (e.g., early Board involvement; assessment of four substantive criteria; ex post evaluation; explicit exit strategies). ### Early repurchases experience (Box 4 highlights) - Early repurchases (Iceland, Latvia, Hungary, Ireland, Portugal) typically coincided with regained market access and reduced market borrowing costs—though with country-specific variations. - Surcharge magnitudes: - Level-based surcharge: 200 basis points. - Time-based surcharge: additional 100 basis points. - Observations: - Fund credit has generally remained well below market rates for most users since the global financial crisis; exceptions (Ireland, Portugal) where market costs fell below Fund costs before early repurchases. - Time-based surcharges (100 basis points) coincide roughly with scheduled repurchases under an SBA (3¼ years after first purchase), encouraging early repurchases. - Illustrative assumptions and numeric notes preserved (e.g., Portugal advance repurchase illustrations, Ireland reduced credit to 300 percent of quota). ### Liquidity, income, and credit risk assessment (selected) - Marginal increases in commitment fee thresholds would not meaningfully affect liquidity risks. - If policy changes become effective on February 1, 2016, projected commitment fee income reduction: about SDR 30–35 million (refunds to be paid). - Surcharge threshold adjustments to 175 or 200 percent (assuming February 1, 2016 quota increases) would reduce surcharge income over FY2016–25 by roughly SDR 260 million (175 percent) or SDR 500 million (200 percent) relative to a 150 percent threshold baseline. - Corrected surcharge calculation (March 28, 2016 supplement): projected cost for 187.5 percent threshold and EFF time-based 51 months is SDR 489 million over FY2016–25 (difference of SDR 79 million vs earlier methodology). ### Proposed decisions and voting requirements (overview) - Six proposed decisions: - Decision I: modify annual and cumulative GRA access limits; limited grandfathering. - Decision II: halve PLL-specific access limits. - Decision III: extend EFF time-based surcharge trigger to 51 months; modify level-based threshold (staff proposals and updated variants show 175/185/187.5/185/200 percent options across drafts); grandfathering included. - Decision IV: modify commitment fee thresholds to 115 and 575 percent of quota (Rule I-8 amendments); transitional election/grandfathering. - Decision V: modify Article IV consultation cycle quota threshold (proposed moves include 140 percent, 145 percent variants). - Decision VI: halve PPM triggering threshold from 200 percent to 100 percent of quota. - Voting requirements: - Decisions I, II, V and VI: majority of votes cast by the Executive Board. - Decisions III and IV: majority carried by seventy percent of the total voting power, pursuant to Article V, Section 8(d). ### Implementation timing and updated staff supplement (February 15–17, 2016 and March 28, 2016) - Updated staff proposal (February 15, 2016 supplement) introduced alternate numeric proposals: - Access limits proposed at 145 percent (annual) and 435 percent (cumulative); PLL cumulative limit 500 percent. - Level-based surcharge threshold suggested at 185 percent (with operational transitional 300 percent until effectiveness or February 26, 2016). - Commitment fee thresholds maintained at 115 and 575 percent. - Article IV consultation threshold suggested at 145 percent. - Effective dates and rolling effectiveness mechanics specified; limited grandfathering retained. - Final drafting and Executive Board text variants reflect numeric adjustments (e.g., 140/145/140145/145 and 175/185/187.5 percent permutations) and transitional language; March 28, 2016 supplement corrected surcharge-income calculations and clarified non-retroactivity and refund treatment for commitment fees for members whose quota increases became effective prior to Board adoption. ### Next review cadence - Staff proposes a standard 5-year review period for access limits (next review early 2021), with option for earlier review after finalization of the 15th General Review of Quotas. - Surcharge and commitment fee policies: review on an as-needed basis, with staff proposing review within a 5-year period if needed and option to bring forward after the 15th Review. *Source: Review of Access Limits and Surcharge Policies (Executive Summary and selected excerpts, _012016; supplements and annexes as provided).* ### EXECUTIVE SUMMARY ### _012016 - EXECUTIVE SUMMARY ### Scope and strategy - This paper reviews access limits and surcharge policies in the Fund’s General Resources Account (GRA). - Builds on the preliminary Executive Board discussion in May 2014, against the backdrop of the 14th Review quotas expected to become effective early in 2016, which will on average double individual members’ quotas. - At the May 2014 meeting, most Directors considered that a moderate increase in normal access limits in SDR terms would broadly restore normal Fund access to levels considered acceptable in 2009, and saw merit in adjusting the surcharge threshold to allow for a moderate increase in the SDR value of credit not subject to the charge. ### Access proposal - Proposes adjusting annual access limits to 140 percent of the new quotas and cumulative access limits to 420 percent of the new quotas (net of scheduled repurchases). - Such an adjustment would result in a 40 percent increase in the SDR value of the current limits (assuming the member’s quota is doubled). - PLL-specific access limits are proposed to be halved to reflect the doubling of quotas upon effectiveness of the 14th Review, mirroring RFI-specific changes already adopted by the Executive Board in July 2015. - Rationale: moderate increase in normal access limits in SDR terms would help attenuate the erosion of absolute access limits since 2009 while preserving the exceptional access framework’s rigor by maintaining application at levels (relative to members’ economies) comparable to 2009. ### Surcharges proposal - Current surcharges provide strong incentives for timely repurchases and support accumulation of precautionary balances. - Staff proposes keeping the level-based and time-based surcharge rates unchanged at 200 and an additional 100 basis points, respectively. - Level-based surcharge: - Presents two options for moderately increasing the surcharge threshold in SDR terms to 175 or 200 percent of new quota. - In either option, surcharge burden for affected members would be reduced; Fund income and accumulation of precautionary balances would decline. - Staff recommends a surcharge level of 175 percent to be more consistent with the Fund’s broadly unchanged resource envelope and to limit reduction in the pace of accumulating precautionary balances. - Time-based surcharge: - Maintains the 2014 proposal to extend the trigger point for time-based surcharges on outstanding credit from the Extended Fund Facility (EFF) from 36 months to 51 months, to better align with the start of repurchases (54 months under extended arrangements) and the nature of EFF balance of payments needs. - Notes drawback: extension could incentivize requests for extended arrangements over SBAs; mitigation: facility choice must be based on analysis of members’ balance of payments problems and qualification for extended arrangements. - Fund income implications: - An adjustment in the level-based surcharge to 175 or 200 percent of quota and assuming February 1, 2016 quota increases would result in a loss of income of roughly SDR 260 and 500 million in FY2016–25, respectively, compared with the 150 percent threshold that would broadly off-set the effects of the quota increase. - The income loss from extending the time-based surcharge trigger for EFF to 51 months under the 175 percent threshold would be minimal due to proposed grandfathering provisions. - Under the 200 percent option, extending the time-based surcharge trigger would result in an additional SDR 75 million in reduced income. ### Commitment fee thresholds proposal - Proposes moderate increases in the SDR value of the commitment fee thresholds, within the range proposed for surcharge thresholds. - Applying moderate increases implies: - Step increases between 115 and 135 percent of quota for the lower commitment fee threshold (compared with 200 percent currently). - Step increases between 575 and 675 percent of quota for the higher threshold (compared with 1,000 percent currently). - Impact on the Fund’s incentive structure and income would be relatively small. - Staff recommends marginal increases to 115 and 575 (consistent with the surcharge threshold recommendation) to limit erosion of incentive structure, including consideration of recent FCL discussions at the Board. - If effective on February 1, 2016, a portion of commitment fees with respect to current precautionary arrangements of about SDR 30–35 million would need to be refunded. ### Article IV consultation cycle and Post-Program Monitoring (PPM) - Proposes changing the quota-based threshold of outstanding Fund credit above which a member may not be placed on an extended Article IV consultation cycle from 200 percent of the current quota to 140 percent of quota. - Proposes halving the threshold for determining expectations of participation in PPM to 100 percent of new quotas as a transitory measure before Board discussion of a forthcoming separate paper on the PPM framework. ### Effectiveness and grandfathering - Recommends that proposals on new access limits and the quota-based thresholds relating to Article IV consultation cycles and PPM become effective upon the general conditions for effectiveness of the 14th Review quota increases being met. - Changes to level-based surcharges and commitment fees are proposed to become effective, with respect to each member: - (i) once the member pays its quota increase under the 14th Review; or - (ii) at the end of the 30-day period after the general conditions for effectiveness of the 14th Review quota increases have been met, whichever comes first. - Extension of the time-based surcharge for extended arrangements is proposed to take effect immediately upon adoption of the relevant Board decision. - Proposes limited grandfathering for members affected by the proposed changes to access, surcharges and commitment fee policies. ### Trends in the use of GRA resources (key statistics and findings) - Quota increases under the 14th General Review are expected to become effective early in 2016; overall Fund quotas would then double to SDR 477 billion with the increase in individual members’ quotas ranging from 39 to 220 percent. - Without offsets, doubling quotas would: - Double resources in absolute (SDR) terms available to the average member under current normal access. - Reduce or eliminate surcharges and commitment fees for the same level of nominal access, which would erode elements of the Fund risk management framework. - Usage trends: - Number of active GRA arrangements: total of 28 active GRA arrangements during 2010–12; since 2012, number dropped to 25 (still above the average of 16 active arrangements in the 3-year period preceding the crisis). - New arrangements averaged seven per year during 2013–15. - Median access of the four largest euro area programs approved during 2010–12 reached about 2,300 percent quota (SDR 23.7 billion). - Median access rose from 50 percent of quota during 1995–2007 to 300 percent of quota during the post-crisis years. - Average access for all SBA and extended arrangements rose from around 125 percent of quota during 1995–2007 to around 540 percent of quota in 2008–15. - Median duration of SBAs rose from 15 months during 1995–2007 to 24 months in 2008–15. - Proportion of extended arrangements under the EFF increased from about 8 percent during 2000–09 to 35 percent during 2010–15. ### Next review - Staff proposes a standard 5-year review period for access limits, although consideration could be given to an earlier review following finalization of the 15th General Review of Quotas. - Surcharge and commitment fee policies to be reviewed on an as-needed basis; staff proposes these policies also be reviewed within a 5-year period if needed, with the option to bring the review forward once the 15th General Review of Quotas is finalized. *January 20, 2016 — Review of Access Limits and Surcharge Policies (Executive Summary)* ### 8. GRA credit outstanding in SDR terms has declined from a post-crisis peak, reflecting ### 8. GRA credit outstanding in SDR terms has declined from a post-crisis peak, reflecting ### Key findings on GRA credit outstanding and concentration - After peaking at around SDR 94 billion in 2012, Fund credit outstanding had dropped to an SDR 51 billion by end-2015. - The bulk of this decline consists of early repurchases, mainly by Ireland and Portugal, while delayed purchases, mainly by Greece and Ukraine, have increased members’ credit outstanding by less than projected. - Total early repurchases in FY2014–15 and so far in FY2016 amount to over SDR 25 billion. - Credit concentration remains very high: - The five largest borrowers hold nearly 90 percent of the Fund’s total GRA credit outstanding. - The single largest borrower holds more than 30 percent of it. ### FCL/PLL and average access levels - The current four arrangements under the FCL/PLL instruments have average access around 820 percent of quota, representing a potential call on Fund resources close to SDR 70 billion (22 percent of the Fund’s forward commitment capacity). - Taking FCL/PLL into account, access levels in the GRA during 2010–15 averaged 675 percent of quota. ### Evolution of access metrics (post-2009 reforms and subsequent erosion) - 2009 decisions: - IMFC called for examination of size and composition of resources and immediate bilateral borrowing of US$250 billion, subsequently incorporated into an expanded NAB. - The 2009 review doubled normal access limits in the GRA. - By end-2015, since the doubling in 2009, normal access limits are estimated to have declined since 2009 by: - 26 percent relative to world GDP, - 32 percent vis-à-vis global trade (sum of exports plus imports), - 27 percent in relation to non-FDI external liabilities, - 23 percent with respect to gross financing needs. - For EMDEs since 2009: - EMDEs’ access limits have declined by roughly 40 percent relative to their GDP, total trade, and non-FDI external liabilities. - Despite this erosion, absolute access levels in relation to GDP remain higher for the median EMDE than for the median advanced economy. ### Proposal for modifying access limits (staff recommendation) - Staff considers a 40 percent increase in access limits in the GRA (in SDR terms) is warranted upon effectiveness of the general conditions for the 14th Review quota increases. - Under the proposal: - Annual access limits would be established at 140 percent of quota. - Cumulative limits would be established at 420 percent of quota (net of scheduled repurchases). - Rationale: - A 40 percent increase would broadly restore the value of normal Fund support to 2009 levels in relation to the average of global GDP, trade and non-FDI external liabilities. - The proposal is broadly consistent with the May 2014 staff proposal of 25 percent, accounting for two additional years of erosion since then. - The revised limits would restore access limits relative to GDP for EMDEs (after excluding China and India) and maintain high scrutiny under the exceptional access framework when Fund credit is above normal limits. - Implementation note: - The proposed 40 percent increase in SDR terms would apply to members whose quota doubles under the 14th Review. Quota increases under the 14th Review vary between 39 percent and 220 percent. ### Grandfathering and treatment of existing cases - A limited grandfathering is proposed for existing non-exceptional access cases: - New access limits would apply to all members when general conditions for the 14th Review quota increases have been met. - Members who were not subject to the exceptional access framework prior to effectiveness of the proposed modifications would be grandfathered: if the change results in a member’s access exceeding the proposed new normal access limits, the exceptional access framework would not apply for the remainder of an existing arrangement. - Additional access under a new arrangement, augmentation of an existing arrangement, or an outright purchase under the RFI exceeding proposed new access limits would trigger application of the exceptional access framework. - Under this proposal, while new normal access limits would fall below current normal access limits in SDR terms for 39 countries, these nominal reductions are marginal (averaging 2 percent). There are currently no active normal access programs that would become exceptional access programs under the new proposal. ### PLL-specific proposals and limits - Staff proposes to keep the average SDR value of PLL-specific access limits unchanged but to halve PLL-specific access limits (in percent of quota) once the 14th Review quota increases become effective: - Specific cumulative limit for all access under the PLL by a member: from 1000 percent of quota to 500 percent of quota, net of scheduled repurchases. - For PLL arrangements with a duration of one or two years: - Annual access limit at time of approval reduced to 250 percent of quota (net of scheduled repurchases). - Total access to 500 percent of quota (net of scheduled repurchases). - For members without an actual balance of payments need at approval, one- to two-year PLLs will be phased with an initial amount not in excess of 250 percent of quota available upon approval. - Six-month PLL arrangements: - Normally subject to a per arrangement limit of 125 percent of quota, net of scheduled repurchases. - A limit of 250 percent of quota, net of scheduled repurchases, may apply in exceptional circumstances where short-term balance of payments needs exceed the 125 percent limit due to exogenous shocks (with total access under all six-month PLL arrangements in no event exceeding a cumulative access limit of 250 percent). ### RFI, PRGT, and timing of next review - RFI (Executive Board action on July 1, 2015): - Board agreed to increase annual and cumulative limits by 50 percent (Decision No. 15820 (15/66)), and to halve the new limits once general conditions for the 14th Review quota increases are met (Decision No. 15821 (15/66))—thereby maintaining the 50 percent increase in SDR terms. - Accordingly, following effectiveness of the 14th quota increase, the RFI would be subject to: - Annual access limit of 37.5 percent of quota. - Cumulative access limit of 75 percent of the new quotas. - PRGT: - Access limits under the PRGT were increased by 50 percent in July 2015. - The Board decided those limits would be halved upon effectiveness of the 14th General Review of Quotas to safeguard self-financing of concessional lending. - Timing: - Staff proposes that overall access limits to the Fund’s general resources be reviewed again in early 2021 (standard 5-year review period), with consideration for an earlier review following effectiveness of the 15th General Review of Quotas. *Source: _012016 - 8. GRA credit outstanding in SDR terms has declined from a post-crisis peak, reflecting* ### Box 2. The Risk Management Role of Access Limits ### Box 2. The Risk Management Role of Access Limits ### Purpose and design of access limits - Access limits are a key element of the Fund’s risk management framework intended to balance: - the need to provide members and markets with confidence regarding the scale of possible Fund financing, and - the need to preserve Fund liquidity and the revolving character of Fund resources. - Annual access limits: - give confidence about the degree of financial support the Fund is normally prepared to provide over a 12-month period, - ensure members do not rely excessively on the Fund but draw on other sources of financing and adopt appropriate adjustment measures, - reduce the risk that members exhaust their potential access to the Fund more rapidly than warranted by the nature and size of balance of payments needs. - Cumulative access limits: - help ensure that the Fund’s resources are not exhausted so borrowers need not be treated on a “first-come-first-served” basis, - reduce the risk that members become unable to repay the Fund, thereby safeguarding Fund resources. ### Determination of access and role as a threshold - Access to GRA resources under Fund arrangements is generally determined by: - the member’s actual, prospective or potential balance of payments needs, - its capacity to repay the Fund, - the strength of the member’s adjustment effort, - the amount of its outstanding use of Fund resources, - its record of such use in the past.1 - Access limits do not set a ceiling on how much a member can obtain from the Fund; they serve as a threshold beyond which the exceptional access policy is triggered. - When thresholds are exceeded, substantive and procedural requirements under the exceptional access policy are triggered, including: - early Board involvement on program discussions, - assessment of four substantive criteria, - higher requirements for program documentation, - an assessment of financial risks to the Fund arising from the proposed access, - an ex post evaluation within one year of the end of the program, - explicit discussions of exit strategies, - discussions of alternative forecast scenarios. - Limits also guide when a member’s credit outstanding is deemed to be substantially high such that post program monitoring is warranted after an arrangement expires. ### Specific instrument limits and additional considerations - While there is no cap on access to GRA resources overall, certain instruments have designed access caps: - Precautionary and Liquidity Line (PLL): capped at 1000 percent of quota applicable cumulatively to all access under the PLL instrument. - Rapid Financing Instrument (RFI): limited to 75 percent of quota per year and 150 percent of quota on a cumulative basis. - Additional considerations apply to decisions on access under specific GRA financing instruments, such as caps or hard limits on access. *Source: Box 2, REVIEW OF ACCESS LIMITS AND SURCHARGE POLICIES, INTERNATIONAL MONETARY FUND.* ### Box 4. Recent Experience with Early Repurchases—Iceland, Latvia, Hungary, Ireland, and Portugal ### Box 4. Recent Experience with Early Repurchases—Iceland, Latvia, Hungary, Ireland, and Portugal ### Recent country experiences with early repurchases - Early repurchases in five post-GFC cases typically coincided with regained market access and a reduction in the cost of market borrowing, though experiences were not uniform across members. - Iceland: - Market confidence began improving ahead of the net repurchase period. - Sizeable early repurchases appear to have reinforced the decline in market borrowing costs. - A subsequent phase of early repurchases followed convergence of market and Fund borrowing costs. - Latvia: - Access to comparably priced market financing following economic adjustment coincided closely with the member fully clearing its credit outstanding with the Fund. - Hungary: - Reduction in market borrowing costs closely trailed declining Fund credit at the start of the net repurchase period. - The decline in market borrowing costs was cut short by domestic political uncertainty in early 2013. - Subsequent early repurchases, despite higher market financing costs, may have reflected political considerations and perceived stigma associated with Fund financing. - Ireland and Portugal: - Market borrowing costs fell below the cost of Fund financing before the peak of credit outstanding and diverged further at the onset of the time-based surcharges. - This reflected economic adjustment efforts and, in part, strengthening of European crisis management institutions. - Access to cheaper market financing appears to have been a motivating factor for their early repurchases. - As a result of recent early repurchases, Ireland has reduced its credit outstanding to the surcharge threshold of 300 percent of quota. ### Cost comparisons and surcharge structure - Surcharge magnitudes cited: - Level-based surcharge: 200 basis points. - Additional time-based surcharge: 100 basis points. - Observations: - The cost of Fund credit has remained well below market rates for most users of Fund resources since the global financial crisis (referenced evidence: Figure 7). - Market financing costs for emerging markets (EMBIG net of rate of charge) dipped below adjusted cost of Fund financing during 2005–08 but reversed sharply thereafter. - For a sample of current or recent high-access users (over 300 percent of quota), median market financing costs have generally remained above the surcharge level, with exceptions including Ireland and Portugal. - At program inception, market premiums are usually much higher than Fund surcharges and typically narrow over the duration of a program; time-based surcharges of 100 basis points, coinciding roughly with scheduled repurchases under an SBA (3¼ years after the first purchase), encourage early repurchases by reducing the spread between market and Fund financing costs. ### Surcharge threshold: options, impacts, and staff recommendation - Context: - Adjusting the level-based surcharge threshold is appropriate once 14th Review quota increases become effective; without adjustment surcharges would apply only at much higher SDR amounts. - Illustration: If the general effectiveness conditions for the 14th Review are met on February 1, 2016, an unchanged surcharge threshold would lower overall expected surcharge income over FY2016–25 by about SDR 1.7 billion compared to unchanged thresholds and quotas. - Options considered and projected income impacts (FY2016–25): - Halving the surcharge threshold to 150 percent of quota: - Would broadly maintain the SDR value of surcharges. - Would lead to a reduction in the Fund’s income of about SDR 61 million in FY2016–25 (relative to current threshold under assumed quota effectiveness on February 1). - Setting the threshold at 175 percent of quota: - Would increase the threshold moderately in SDR terms by about 15 percent relative to the current threshold. - Fund income would decline modestly relative to halving to 150 percent by SDR 259 million over FY2016–25. - Staff recommendation: a more modest increase to 175 percent of quota on balance. - Setting the threshold at 200 percent of quota: - Would align with lowest historical surcharge thresholds and broadly align with access limits. - Would increase the threshold in SDR terms by about 35 percent relative to the current threshold. - Projected additional reduction in income over FY2016–25 of about SDR 238 million (SDR 497 million relative to halving to 150 percent of quota), further slowing accumulation of precautionary balances. - Tradeoffs highlighted: - A lower threshold supports the revolving character of Fund resources, income preservation, and accumulation of precautionary balances. - A higher threshold would provide greater savings for large borrowers but reduce projected Fund income and weaken price-based incentives for early repurchases. - Timing and implementation: - Proposed effective timing: for each member when the member pays its quota increase, or at the end of the 30 days after the general conditions for effectiveness of the 14th Review quota increases have been met (“Quota Payment Period”), whichever is earlier. - Rationale: rolling effectiveness avoids disadvantaging members who may not have time to pay quota increases and limits negative impacts on Fund income. ### Grandfathering proposal for existing arrangements - Staff proposes a grandfathering regime for members with credit outstanding and/or undrawn balances under existing arrangements at the time the new threshold is adopted. - Under the proposal: - Members with credit outstanding or undrawn balances would be given the option to choose whether to pay surcharges based on their old quota/old threshold or new quota/new threshold. - Grandfathering would end when a new request for use of Fund resources for the member is approved (e.g., augmentation of an existing arrangement, or approval of a new instrument or arrangement) after the new surcharge thresholds come into effect. - Staff would not favor an enhanced grandfathering option based on new quota/old threshold. - Purpose: - Ensure current debtor members are not worse off in terms of surcharge cost for existing credit outstanding and undisbursed commitments compared to the current quota/current threshold. - Applying the new surcharge regime to other cases at the end of the Quota Payment Period ensures each member’s Fund credit exposure is subject to a single system of surcharges to mitigate credit risk. ### Other numerical and programmatic notes - Specific numeric references preserved: - Time to scheduled regular repurchases under an SBA: 3¼ years after the first purchase. - Ireland has reduced its credit outstanding to the surcharge threshold of 300 percent of quota. - Illustrative advance repurchase assumption: Portugal makes advance repurchases of SDR 4.9 billion in March 2016 (used in baseline projections). - Projected income impacts and comparison windows are reported for FY2016–25 and FY 2016–25 as indicated above. *Source: IMF — Box 4. Recent Experience with Early Repurchases—Iceland, Latvia, Hungary, Ireland, and Portugal (from the Review of Access Limits and Surcharge Policies).* ### 32. Time-based surcharges were designed to reflect repurchase schedules of high access ### _012016 - 32. Time-based surcharges were designed to reflect repurchase schedules of high access ### Design and original intent of time-based surcharges - Time-based surcharges were designed to reflect repurchase schedules of high access credit tranche arrangements (e.g., SBA). - When the current structure of surcharges was adopted in 2009: - It was expected that arrangements involving high access would normally be in the credit tranches. - The Board acknowledged that high access would not normally be expected under extended arrangements, which were viewed as particularly useful for providing blended support (with the ECF) to low income countries. - Expected timing under the original design: - Time-based surcharges expected to start around the same timeframe as repurchases under the credit tranches (e.g., at 36 months for time-based surcharges as compared with 39 months for credit tranche repurchases). ### Issue raised by high access extended arrangements - Since 2009, a number of high access extended arrangements subject to surcharges have been approved: - Thirteen extended arrangements have been approved since 2009, including seven extended arrangements with access high enough to incur surcharges. - These include the four members with the largest outstanding credit as a percentage of quota at this point. - Under extended arrangements: - Repurchases are scheduled in twelve equal semiannual installments starting 4½ years from the date of each purchase. - A member receiving front-loaded financing could be subject to a time-based surcharge 1½ years before its repurchase schedule begins. - Concern: - The use of extended arrangements with longer repayment schedules alongside high access calls for revisiting the time-based surcharge design. ### Proposal to extend the time-based surcharge trigger for EFFs - Proposal: - Extend the time-based surcharge trigger for EFFs to 51 months while keeping it at 36 months for credit tranche purchases. - Under this proposal, the time-based surcharge would start applying 3 months before repayments fall due under each type of arrangement (i.e., aligned in relation to when repurchases start). - Rationale: - Taking market access as an indicator of balance of payments improvement, past arrangements suggest members with extended arrangements have taken longer to access markets after the arrangement began than members with SBAs: 31 vs. 13 months on average, respectively. - Drawbacks and mitigation: - Extending the trigger could strengthen incentives to request extended arrangements even when an SBA would be more appropriate. - Mitigating factor: Qualification criteria for the relevant facility must still be met. - Differentiating surcharges across facilities would add complexity, counter to the 2009 reform goal of simplification. ### Quantified fiscal and balance implications - Estimated impact on Fund income and precautionary balances: - Fund’s income from surcharges on outstanding credit and scheduled purchases under current arrangements would be reduced in aggregate by up to about SDR 75 million over FY2016–25, depending on the surcharge threshold selected, if the time-based trigger for extended arrangements were moved to 51 months as of February 1, 2016. - Any savings would accrue mainly to Ukraine among current members with credit outstanding; Albania, Cyprus, and Pakistan would also benefit. Greece started paying time-based surcharges for the first quarter of FY2014; Portugal started for the first quarter of FY2015. - All else unchanged, this would have a minor negative impact on precautionary balances which would remain below the indicative target of SDR 20 billion over the medium term. ### Board views and staff recommendation - Board discussion (2014): - No consensus: many Directors saw merit in lengthening to 51 months while maintaining 36 months for credit tranche purchases; many others opposed, citing risks of perverse incentives, weakening the SBA’s role, and slowing the pace of building precautionary balances. - Staff position: - Staff continues to support extending the trigger-period for time-based surcharges on credit under extended arrangements to 51 months, while acknowledging drawbacks. - Staff proposes the change be made effective immediately upon adoption of the relevant Board decision (decoupled from level-based surcharge threshold effectiveness). - Staff proposes surcharge policies be reviewed again in early 2021, with consideration for an earlier review following finalization of the 15th General Review of Quotas. ### Calculation mechanics if trigger is lengthened (Box 6) - Current rule: - Time-based surcharges are levied when Fund credit outstanding in the GRA has been in excess of 300 percent of quota for more than 36 months. - If extended arrangement trigger lengthened to 51 months: - It would be necessary to distinguish between credit outstanding originating from credit tranches and from extended arrangements. - During the period from 36 to 51 months, only credit outstanding that originates from purchases in the credit tranches (including under SBAs) would be subject to time-based surcharges. - Starting at 51 months, credit outstanding that originates from purchases under extended arrangements would also become subject to surcharges. - Operational details preserved: - The “clock” for assessing the start of time-based surcharges would start when a member’s total GRA credit outstanding has exceeded the proposed new level-based threshold of 175/200 percent of quota. - Time-based surcharges would continue to be levied until a member’s total outstanding use of Fund credit drops below 175/200 percent of quota. - If a member opts for grandfathering on the level-based surcharges and pays level-based surcharges based on its old quota/old threshold, that member’s time-based surcharges will continue to be levied based on its old quota and the 300 percent quota threshold. - Illustrative modified calculation (36–51 months) from Box 6: - Member A: - Total credit outstanding from purchases: 500% of quota - in the credit tranche: 250% of quota - under EFFs: 250% of quota - Amount above threshold for time-based surcharges: 200% of quota - Ratio of credit outstanding in the credit tranches to total credit outstanding: 1/2 - Amount subject to time-based surcharges (36–51 months): 100% of quota - Member B: - Total credit outstanding from purchases: 500% of quota - in the credit tranche: 100% of quota - under EFFs: 400% of quota - Amount above threshold for time-based surcharges: 200% of quota - Ratio of credit outstanding in the credit tranches to total credit outstanding: 1/5 - Amount subject to time-based surcharges (36–51 months): 40% of quota ### Market access evidence (Box 5) - Average times to regaining market access since 1998: - Members under extended arrangements: Average 31 months from onset of arrangement. - Members under SBAs: Average 13 months from onset of arrangement. - Caveats noted: - Notable variation within both groups. - In several cases, rapid return to markets was preceded by prolonged Fund financing engagement; measuring from onset of financing engagement increases durations but extended arrangements remain longer on average. - Absence from markets may sometimes reflect preference for alternative financing sources. ### Related proposal on commitment fee thresholds - Background: - Current commitment fee structure introduced in 2009 to help mitigate liquidity risks and compensate the Fund for establishing and monitoring arrangements and setting aside resources. - Upwardly-sloping fee structure introduced in 2009, including creation of the FCL, to discourage unnecessarily high precautionary access. - 2014 Executive Board views: - Preliminary discussion: most Directors favored a modest increase in the threshold in SDR terms (effectively lowering commitment fees). - In the 2014 FCL/PLL review some Directors called for an increase in the commitment fee (in basis points) to discourage prolonged large precautionary arrangements. - Staff proposal following the 14th Review doubling of quotas: - Halve commitment fee thresholds to preserve incentive structure: from 200 and 1,000 percent of quota to 100 and 500 percent of quota. - Apply a moderate increase in SDR value of thresholds (in line with surcharge threshold proposals of 15 to 35 percent), yielding candidate thresholds in percent-of-14th-Review-quota terms between: - lower threshold: 115 and 135 percent of 14th Review quotas (staff proposes 115 percent) - higher threshold: 575 and 675 percent of quota (staff proposes 575 percent) - Staff proposes to adopt new thresholds of 115/575 percent of quota to minimize erosion of the incentive structure. - New thresholds to be effective for each member once the member pays its quota increase under the 14th Review or at the end of the Quota Payment Period, whichever comes earlier. - Application: - New commitment fee thresholds would apply to all members by the end of the Quota Payment Period (except those with existing arrangements who could be grandfathered). *Italic: Source — Excerpt from Review of Access Limits and Surcharge Policies (as provided in the supplied content).* ### 44. The proposal represents a limited reduction of the risk mitigation elements of ### 44. The proposal represents a limited reduction of the risk mitigation elements of ### Liquidity risks - The marginal increase in commitment fee thresholds would not have a meaningful impact on liquidity risks facing the Fund. - Concerns regarding FCL exit were addressed at least partly at the past FCL/PLL review by: - standardizing the access and approval process, and - including a well-articulated exit strategy in staff reports. - The increase in thresholds would run counter to the views expressed by some Directors that such fees should be increased, rather than lowered. - Pending more experience, commitment fees, including the level of the fee, can be reviewed in the context of future FCL reviews. ### Income and credit risks - If the policy changes become effective on February 1, 2016, projected income from commitment fees would be reduced by about SDR 30-35 million. - The reduction is equivalent to a portion of the already received commitment fees from current precautionary arrangements that would need to be refunded. - The impact on the Fund’s income from the proposed changes in the thresholds for commitment fees would be manageable, resulting in a small reduction in the pace of accumulation of precautionary balances. ### Grandfathering proposal for commitment fee thresholds - Staff proposes any change in commitment fee thresholds become effective subject to a grandfathering regime for members with arrangements in effect at the time when the new commitment fee thresholds are adopted. - Members with existing arrangements would be given the option to choose whether the commitment fee for any remaining balances should be calculated based on the old thresholds/old quota or the new thresholds/new quota. - Grandfathering for a member would end after a request for augmentation of an existing arrangement. - Any new GRA arrangement approved after the Board adopts the new commitment fee thresholds will be subject to the new threshold. - Members would have until the end of the 30-day Quota Payment Period to notify the Fund of their intention to benefit from grandfathering. ### Historical role and rationale of commitment fees (1952–2009) - Commitment fees were first introduced in conjunction with the establishment of the Stand-by Arrangement in 1952 at a charge of 25 basis points per year. - In 2000 a two-tier schedule was adopted: 25 basis points per annum for commitments up to 100 percent of quota and 10 basis points on amounts in excess of 100 percent of quota. - The current commitment fee schedule stems from the 2009 GRA lending toolkit reform and reflects an expanded role for liquidity risks management. - Staff argued that a progressively increasing schedule with access would increase incentives against unnecessarily high precautionary access and provide income to help offset the cost of setting aside substantial financial resources. ### Summary of proposed decisions (overview) - Six decisions are proposed for adoption by the Board: - Decision I on Access Limits: modifies annual and cumulative GRA access limits; limited grandfathering regime provided. - Decision II on PLL-Specific Access Limits: halves the access limits applicable to PLL arrangements. - Decision III on Surcharge Policies: (i) extend the trigger for the time-based surcharge for outstanding purchases under the EFF to 51 months, and (ii) modify the level-based threshold to 175 percent of quota on the rolling effectiveness basis set out in the paper; grandfathering provided. - Decision IV on Commitment Fees: modifies the commitment fee thresholds to 115 and 575 percent of quota, respectively, on the same rolling effectiveness basis as the level-based surcharge; limited grandfathering included. - Decision V on Article IV Consultation Cycles: modifies the quota-based threshold above which a member may not be placed on an extended Article IV consultation cycle from 200 percent of quota to 140 percent of quota. - Decision VI on Post-Program Monitoring: halves the quota-based threshold on credit outstanding that triggers the expectation of PPM engagement from 200 percent of quota to 100 percent of quota. - Voting requirements: - Decisions I, II, V and VI each may be approved with a majority of votes cast by the Executive Board. - Decisions III and IV each would require a majority carried by seventy percent of the total voting power, pursuant to Article V, Section 8(d). ### Decision IV: Commitment Fees — detailed provisions - Rule I-8 amendments (charges per twelve-month relevant period): - (a)(i) 15/100 of 1 percent per annum on amounts of up to 115 percent of the member’s quota that could be purchased during the relevant period; - (a)(ii) 3/10 of 1 percent per annum on amounts in excess of 115 percent and up to 575 percent of the member’s quota that could be purchased during the relevant period; - (a)(iii) 3/5 of 1 percent per annum on amounts in excess of 575 percent of the member’s quota that could be purchased during the relevant period. - Refunds and reductions when purchases are made: - (b)(i) reduction of the portion of the charge corresponding to subparagraph (a)(i) proportional to purchases up to 115 percent of quota; - (b)(ii) reduction of the portion of the charge corresponding to subparagraph (a)(ii) proportional to purchases in excess of 115 percent and up to 575 percent of quota; - (b)(iii) reduction of the portion of the charge corresponding to subparagraph (a)(iii) proportional to purchases in excess of 575 percent of quota. - Cancellation: - (c) If a member cancels an arrangement, the Fund shall repay the charge proportionate to the unexpired period and the amount that could still be purchased under the arrangement at cancellation. - Media of repayment: - (d) Refunds and repayments shall be made in the media selected by the Fund. - Transitional thresholds before quota increase effective date or end of Quota Payment Period: - (e) Instead of thresholds of 115 percent and 575 percent, thresholds of 200 percent and 1000 percent, respectively, shall be used for computing charges and refunds for a member prior to the effective date of that member’s quota increase under the 14th General Review of Quotas, or prior to the end of the 30-day Quota Payment Period, whichever is earlier. - Election for members with arrangements in effect on [February 1, 2016]: - (f) Such a member may notify the Fund by the end of the Quota Payment Period that it elects to have charges and refunds for that arrangement based on thresholds of 200 percent and 1000 percent of the member’s quota in effect prior to the quota increase, instead of 115 percent and 575 percent. - Absent such notification, the charges and refunds are determined under subparagraphs (a)–(d). - If a member has made the election under (f), the election ceases to apply as of the date of the Fund’s approval of any augmentation of an arrangement in effect for that member prior to [February 1, 2016]. - New arrangements approved after [February 1, 2016] are not eligible for the election under (f). ### Article IV consultation cycle and Post-Program Monitoring thresholds - Article IV consultation cycle threshold change: - Raise the threshold on outstanding Fund credit above which a member may not be placed on an extended Article IV consultation cycle from 200 percent of the current quota to 140 percent of quota (in line with proposed increase in access limits). - Post-Program Monitoring (PPM) threshold change: - Halve the current threshold for determining expectations of member’s participation in PPM to 100 percent of quota as a transitory measure ahead of a forthcoming paper proposing further changes in the PPM framework. *International Monetary Fund — Review of Access Limits and Surcharge Policies (excerpt).* ### Annex I ### Annex I ### Decision I. Access Policy and Limits in the Credit Tranches and Under the Extended Fund Facility and on Overall Access to the Fund’s General Resources, and Exceptional Access Policy – Review and Modification - Overall access by members to the Fund’s general resources shall be subject to: - an annual limit of 200140 percent of quota; and - a cumulative limit of 600420 percent of quota, net of scheduled repurchases; - provided that these limits will not apply in cases where a member requests a Flexible Credit Line arrangement in the credit tranches, although outstanding holdings of a member’s currency arising under such arrangements will be taken into account when applying these limits in cases involving requests for access under other Fund facilities. - Exceptional access under a PLL arrangement pursuant to paragraph 3: - such access, combined with the member’s access to the Fund’s resources under other PLL arrangements, shall in no event exceed a cumulative limit of 1000500 percent of quota, net of scheduled repurchases. - Review provision: - The guidelines for access, the access limits set forth in this Decision, and the experience with access in amounts exceeding these limits shall be reviewed no later than March 29, 2014,[February 1st, 2021], on the basis of all relevant factors, including the magnitude of members’ balance of payments problems and developments in the Fund’s liquidity. ### Decision II. The Fund’s Financing Role—Reform Proposals on Liquidity and Emergency Assistance--Precautionary and Liquidity Line (PLL) Arrangements - Cumulative cap for PLL instrument: - access to Fund resources under the PLL instrument shall be subject to a cumulative cap of 1000 500 percent of quota, net of scheduled repurchases, which shall apply to all PLL arrangements regardless of duration. - Annual access limits and phased availability for one- to two-year PLL arrangements: - access under PLL arrangements with a duration of one to two years shall be subject to an annual access limit of 500 250 percent of quota (net of scheduled repurchases) applicable at the time of approval; - For one-year PLL arrangements approved for members not having an actual balance of payment need at the time of approval: - the entire amount of approved access shall be available upon approval and shall remain available throughout the arrangement period, subject to completion of a six-monthly review as specified in paragraph 3(b). - For PLL arrangements with duration of one to two years approved for members not having an actual balance of payment need at approval: - purchases shall be phased, with an initial amount not in excess of 500 250 percent of quota being available upon approval and the remaining amount being made available at the beginning of the second year, subject to relevant six-monthly reviews. - Six-month PLL arrangements access limits and exceptional augmentation: - normally, a per arrangement limit of 250 125 percent of quota, net of scheduled repurchases, shall apply to six-month PLL arrangements, with the entire amount available upon approval and remaining available throughout the arrangement period; - in exceptional circumstances (exogenous shocks, heightened regional or global stress), a per arrangement limit of 500 250 percent of quota may apply to six-month PLL arrangements, on a case-by-case basis, with the entire amount available upon approval or, for augmentations, upon completion of an ad hoc review under paragraph 4(d); - total access under all six-month PLL arrangements shall in no event exceed a cumulative six-month PLL arrangement access limit of 500 250 percent of quota, net of scheduled repurchases. ### Decision III. Surcharges on Purchases in the Credit Tranches and Under the Extended Fund Facility - Rate of charge and thresholds: - The rate of charge under Article V, Section 8(b) on the Fund’s combined holdings of a member’s currency in excess of 300175 percent of the member’s quota in the Fund resulting from purchases in the credit tranches and under the Extended Fund Facility shall be 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing; - the rate of charge in any case where such holdings in excess of 300 percent of quota are outstanding for more than three years after August 1, 2009 shall include an additional 100 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing.; - as adjusted for purposes of burden sharing, on such holdings in excess of the 175 percent threshold that have been outstanding for more than 36 months in the case of purchases in the credit tranches or that have been outstanding for more than 51 months in the case of purchases under the Extended Fund Facility. - Transitional threshold and elections: - Instead of the threshold of 175 percent referred to in paragraph 1, a threshold of 300 percent shall be used in computing the rate of charge on the Fund’s combined holdings of a member’s currency prior to the effectiveness of the quota increase under the 14th General Review of Quotas for that member or prior to the end of the 30-day Quota Payment Period, whichever is earlier. - A member with credit outstanding in the credit tranches or under the Extended Fund Facility, or with an arrangement in effect on [February 1, 2009 shall2016], may notify the Fund by the end of the Quota Payment Period that it elects to have the option to elect whether the rate of charge on such existing holdings and on holdings arising from future purchases under such an existing effective arrangement be based on the threshold of 300 percent, instead of the threshold of 175 percent, provided that the threshold of 300 percent would be applied to the member’s quota in effect prior to its quota increase under the 14th General Review of Quotas. - Absent such notification, the rate of charge shall be computed: - pursuant to paragraph 1 above; or - pursuant to the framework for surcharges on purchases in the credit tranches and under the Extended Fund Facility that was in effect from November 28, 2000 until the date of this Decision (as set out in the Annex to this Decision). - Notification deadlines and effect of new arrangements: - If a member has made an election under the transitional paragraph, it shall notify the Fund by July 29, 2009 whether it elects paragraph 2(a)(i) or 2(a)(ii); failure to notify by July 29, 2009 results in computation pursuant to paragraph 2(a)(i). - When the Fund approves a new arrangement on or after August 1, 2009 for a member that has elected to have the rate of charge computed pursuant to paragraph 2(a)(ii), such election shall cease to apply as of the date of the Fund’s approval of any new access to the Fund’s general resources for that member (including an augmentation of an arrangement in effect on [February 1, 2016]); thereafter the rate of charge shall be computed pursuant to paragraph 1; provided that the additional 100 basis points charge shall apply only where combined holdings remain in excess of 300 percent of quota for more than three years after the date of approval of the new arrangement. - Review provision: - This Decision shall be reviewed in accordance with Decision No. 13814-(06/98), adopted November 15, 2006 on implementing streamlining of policy reviews. ### Decision IV. Commitment Fees - Charges payable at the beginning of each twelve-month relevant period of an arrangement: - 15/100 of 1 percent per annum on amounts of up to 200115 percent of the member’s quota that could be purchased during the relevant period; and - 3/10 of 1 percent per annum on amounts in excess of 200115 percent and up to 1000575 percent of the member’s quota that could be purchased during the relevant period; and - 3/5 of 1 percent per annum on amounts in excess of 1000575 percent of the member’s quota that could be purchased during the relevant period. - Reductions and refunds when purchases are made: - If purchases during the relevant period do not exceed 200115 percent of quota, the portion of the charge calculated under (a)(i) shall be reduced proportionally to the purchases relative to the amount of the arrangement not exceeding 200115 percent of quota that could be purchased during the relevant period. - If purchases exceed 200115 percent but do not exceed 1000575 percent of quota, the portion of the charge calculated under (a)(ii) shall be reduced proportionally to the purchases relative to the amount of the arrangement exceeding 200115 percent but not exceeding 1000575 percent. - If purchases exceed 1000575 percent of quota, the portion of the charge calculated under (a)(iii) shall be reduced proportionally to the purchases relative to the amount of the arrangement exceeding 1000575 percent of quota. - Cancellation and repayment: - If a member notifies the Fund that it wishes to cancel an arrangement, the Fund shall repay to the member a portion of the charge representing the charge for the period remaining unexpired at the date of cancellation for the amount that could still be purchased under the arrangement at the date of cancellation for which the member has paid a charge. - Refunds and repayments shall be made in the media selected by the Fund. - Transitional thresholds and election: - Instead of thresholds of 115 percent and 575 percent, thresholds of 200 percent and 1000 percent, respectively, shall be used in computing charges and refunds for a member prior to the effective date of that member’s quota increase under the 14th General Review of Quotas, or prior to the end of the 30-day Quota Payment Period, whichever is earlier. - A member with an arrangement in effect on [February 1, 2016] may notify the Fund by the end of the Quota Payment Period that it elects to have charges and refunds for such arrangement based on thresholds of 200 percent and 1000 percent instead of 115 percent and 575 percent. Absent notification, charges and refunds shall be determined under subparagraphs (a)–(d). - An election under this subparagraph (f) ceases to apply as of the date of the Fund’s approval of any augmentation of an arrangement in effect for that member prior to [February 1, 2016]; new arrangements approved after [February 1, 2016] are not eligible for the election under subparagraph (f). ### Decision V. Article IV Consultation Cycles - Article IV consultation cycle provision: - the member has outstanding credit to the Fund under all facilities above one hundred and forty two hundred percent (200140%) of the member’s quota. ### Decision VI. Post-Program Monitoring (PPM) - PPM triggering threshold and expectation: - If outstanding credit to a member from the Fund’s General Resources Account (GRA), or from the Fund as Trustee of the Poverty Reduction and Growth Facility Trust (PRGF Trust), or a combination thereof, exceeds a threshold of 200 100 percent of quota, and the member does not have a program supported by a Fund arrangement or is not implementing a staff monitored program with reports issued to the Executive Board, or the member does not have a program supported by a Policy Support Instrument (“PSI”), the member will be expected to engage in Post-Program Monitoring (PPM) with the Fund upon the recommendation of the Managing Director. - The Managing Director shall recommend PPM to the Executive Board unless, in the view of the Managing Director, the member’s circumstances (strength of policies, external position, or expectation of a successor arrangement or staff monitored program within the next six months) are such that the process is unwarranted. - PPM will normally cease when the member’s outstanding credit falls below the threshold of 200 100 percent of quota. ### Appendix Table 1. Access Under Fund GRA Arrangements Approved During 2008–15 — Selected entries (SDR million) and (% of quota) - Non-precautionary on approval--SBA (selected rows): - Georgia: Effective date 9/15/2008; First Year Disbursements (SDR million) 18477; (% of quota) 317; Total amount disbursed (% of quota) 1082; Total amount disbursed (SDR million) 38457; Original Start of Arrangement (SDR million) Mar-100527 - Ukraine: Effective date 11/5/2008; First Year Disbursements (SDR million) 2411,000; (% of quota) 802; Total amount disbursed (% of quota) 2194; Total amount disbursed (SDR million) 150,107,000; Original Start of Arrangement Nov-10698,250 - Hungary: Effective date 11/6/2008; First Year Disbursements (SDR million) 1710,538; (% of quota) 1,015; Total amount disbursed (% of quota) 4067; Total amount disbursed (SDR million) 167,357,637; Original Start of Arrangement Apr-1007,637 - Iceland: Effective date 11/19/2008; First Year Disbursements (SDR million) 241,400; (% of quota) 1,190; Total amount disbursed (% of quota) 4765; Total amount disbursed (SDR million) 951,190; Original Start of Arrangement Nov-100770 - Pakistan: Effective date 11/24/2008; First Year Disbursements (SDR million) 235,169; (% of quota) 500; Total amount disbursed (% of quota) 2002; Total amount disbursed (SDR million) 614,784,936; Original Start of Arrangement Oct-1085,233 - Precautionary on approval--SBA (selected rows): - Honduras: Effective date 4/7/2008; Original Amount Approved Access (SDR million) 1239; Original Duration (Months) 003000; Expiration Apr-0900 - El Salvador: Effective date 1/16/2009; Original Amount Approved Access (SDR million) 14514; Original Duration (Months) 3000; Expiration Mar-1000 - EFF arrangements (selected rows): - Liberia: Effective date 3/14/2008; Original Amount Approved Access (SDR million) 36343; First Year Disbursements (SDR million) 265265; Total amount disbursed (SDR million) 88265343; Expiration Mar-112000 - Ireland: Effective date 12/16/2010; First Year Disbursements (SDR million) 3619,466; (% of quota) 2,322; Total amount disbursed (% of quota) 5987; Total amount disbursed (SDR million) 742,32219,466; Expiration Dec-13019,466 - FCL (selected rows): - Mexico: Effective date 4/17/2009; Original Amount Approved Access (SDR million) 1231,528; Original Duration (Months) 1,0000; First Year Disbursements (SDR million) 01,09100; Expiration Apr-1000 - Poland: Effective date 5/6/2009; Original Amount Approved Access (SDR million) 1213,690; Original Duration (Months) 1,0000; First Year Disbursements (SDR million) 01,00000; Expiration May-1000 - PCL/PLL (selected rows): - Macedonia, FYR: Effective date 1/19/2011; Original Amount Approved Access (SDR million) 24413; Original Duration (Months) 599; First Year Disbursements (SDR million) 286300; Total amount disbursed (SDR million) 286197; Expiration Jan-130197 - Morocco: Effective date 8/3/2012; Original Amount Approved Access (SDR million) 244,117; Original Duration (Months) 7000; First Year Disbursements (SDR million) 035000; Expiration Aug-1400 - Source note in table: - Source: Executive Board documents, and IMF staff calculations. - Footnote 1/: Reflects amounts and duration agreed at the time the arrangements were initially approved; excludes potential access under external contingency mechanisms and other augmentations. - Table headings include: Fund Credit Outstanding Country; Effective date of arrangement; Original Duration (Months); Original Amount Approved Access; First Year Disbursements (SDR million) (% of quota); Actual Avg. Annual Access (% of quota); Total amount disbursed (% of quota); Total amount disbursed (SDR million); Original Start of Arrangement; Expiration; End of Arrangement. *Source: _012016 - Annex I* ### Appendix Table 2. Trends in GRA-Supported Programs, 2003–15 ### Appendix Table 2. Trends in GRA-Supported Programs, 2003–15 ### Trends in active and new programs (2003–15) - Number of active programs: - Average 2003-07: 19.6 - 2008: 17 - 2009: 29 - 2010: 37 - 2011: 33 - 2012: 12 - 2013: 8 - 2014: 23 - 2015: 24 - Of which (active programs by facility): - SBA: Average 2003-07: 17.4; 2008: 15; 2009: 24; 2010: 27; 2011: 21; 2012: 19; 2013: 12; 2014: 9; 2015: 10 - EFF: Average 2003-07: 2.2; 2008: 2; 2009: 2; 2010: 4; 2011: 5; 2012: 9; 2013: 8; 2014: 8; 2015: 8 - FCL/PLL/PCL: n.a. for average 2003-07 and 2008; 2009: 3; 2010: 6; 2011: 7; 2012: 6; 2013: 7; 2014: 6; 2015: 6 - Number of new programs (includes renewal): - Average 2003-07: 5.6 - 2008: 9 - 2009: 17 - 2010: 13 - 2011: 8 - 2012: 7 - 2013: 8 - 2014: 7 - 2015: 6 - New programs by facility: - SBA: Average 2003-07: 5.2; 2008: 8; 2009: 13; 2010: 7; 2011: 3; 2012: 7; 2013: 3; 2014: 4; 2015: 3 - EFF: Average 2003-07: 0.4; 2008: 1; 2009: 3; 2010: 1; 2011: 1; 2012: 3; 2013: 3; 2014: 1; 2015: 1 - FCL/PLL/PCL: n.a. for average 2003-07 and 2008; 2009: 3; 2010: 3; 2011: 4; 2012: 2; 2013: 2; 2014: 2; 2015: 2 ### Precautionary and exceptional access (new programs) - Precautionary at approval (new programs): - SBA: 3.2 (average 2003-07); then 1; 4; 2; 2; 1; 1; 1; 2 (2008–2015 sequence) - EFF: 0.0 (all listed periods) - Exceptional access (new programs): - SBA: 0.85 (average 2003-07); then 1; 0; 5; 2; 2; 9; 6; 10 (2008–2015 sequence) - EFF: 0.0 (in most periods listed) and small nonzero entries: 1; 1; 1; 0; 0; 1 (specific years as in table) ### Access and duration (new programs) - Access average (new programs, in percent of quota): - SBA: 88.97; 0.044957563633309285309193 (note: table presents long concatenated digits across columns) - EFF: 26.226530087223062159404229900 - FCL/PLL/PCL: n.a. and sequences: 96 77 67 1000 100 29 02927709 (as shown in source) - Duration average (new programs, in months): - SBA: 24.62624292726243223 - EFF: 36.0648363648403748 - FCL/PLL/PCL: n.a. and sequences: 12 10 24 24 24 24 ### Memo items: shares (percent of new programs) - Precautionary SBA (in % of new SBAs): 61.51331296725503367 - Precautionary EFF (in % of new EFFs): 0.000000000 - Exceptional SBA (in % of new SBAs): 15.4637729672550330 - Exceptional EFF (in % of new EFFs): 0.010003310010000100 Note: Table reflects amounts and duration agreed at time arrangements were initially approved; excludes external contingency mechanism and augmentations. *Italic source line: Appendix Table 2. Trends in GRA-Supported Programs, 2003–15 (excerpt).* --- ### Appendix Table 3. Fund Arrangements with Exceptional Access, 1995–2015 ### Aggregate counts and source - Number of arrangements: 60 - Number of countries: 39 - Source: IMF Finance Department. - Note: As of November 30, 2015, excluding SRFs. All arrangements were approved for amounts above annual and/or cumulative limits. ### Selected entries (date, country, type, arrangement in SDR millions, in percent of quota, GRA credit outstanding prior to approval of programs, in percent of quota, total arrangement amounts under all facilities) - 1 Mexico 2/1/1995 SBA 149 12,070 688 - 2 Russia I 3/26/1996 EFF 166 6,901 160 - 3 Thailand 8/20/1997 SBA -2,900 505 - 4 Indonesia I* 11/5/1997 SBA -8,338 557 - 5 Korea 12/4/1997 SBA -15,500 1,938 - 6 Indonesia II* 8/25/1998 EFF 245 5,383 259 - 7 Brazil 12/2/1998 SBA -10,420 480 - 8 Turkey I* 12/22/1999 SBA 461 5,038 300 - 9 Indonesia III 2/4/2000 EFF 359 3,638 175 - 10 Brazil 9/14/2001 SBA 981 2,144 400 - 11 Serbia, Republic of 1/16/2009 SBA -2,619 560 - 12 Mongolia 4/1/2009 SBA -153 300 - 13 Costa Rica 4/11/2009 SBA -492 300 - 14 Mexico 4/17/2009 FCL -31,528 1,000 - 15 Guatemala 4/22/2009 SBA -631 300 - 16 Poland 5/6/2009 FCL -13,690 1,000 - 17 Colombia 5/11/2009 FCL -6,966 900 - 18 Mexico II 3/25/2010 FCL -31,528 1,000 - 20 Poland II 7/2/2010 FCL -13,690 1,000 - 21 Mexico III 1/10/2011 FCL -47,292 1,500 - 22 Macedonia, FYR 1/19/2011 PLL -413 600 - 23 Poland III 1/21/2011 FCL -19,166 1,135 - 24 Romania II 3/31/2011 SBA 1,026 3,091 300 - 25 Colombia II 5/6/2011 FCL -3,870 500 - 26 Jordan 8/3/2012 SBA 150 1,364 800 - 27 Morocco 8/3/2012 PLL -4,117 700 - 27 Mexico IV 11/30/2012 FCL -47,292 1,500 - 28 Poland IV 1/18/2013 FCL -22,000 1,303 - 28 Colombia III 6/24/2013 FCL -3,870 500 - 29 Morocco II 7/28/2014 PLL -3,235 550 - 29 Mexico V 11/26/2014 FCL -47,292 1,304 - 30 Poland V 1/14/2015 FCL -15,500 918 - 30 Colombia IV 6/17/2015 FCL -3,870 500 B. Subject to surcharges (selected entries): - Turkey II 2/4/2002 SBA 116 512,821 1,330 - Brazil* 9/6/2002 SBA 769 27,375 902 - Argentina 1/24/2003 SBA 498 2,175 103 - Argentina II 9/20/2003 SBA 517 8,981 424 - Turkey III 5/11/2005 SBA 135 76,662 691 - Uruguay 6/8/2005 SBA 534 766 250 - Liberia 2/3/14/2008 EFF 155 343 265 - Georgia 3/*9/15/2008 SBA -747 497 - Ukraine 11/5/2008 SBA 511 1,000 802 - Hungary 11/6/2008 SBA -10,538 1,015 - Iceland 11/19/2008 SBA -1,400 1,190 - Pakistan 3/11/24/2008 SBA 15,169 500 - Latvia 12/23/2008 SBA -1,522 1,071 - Belarus, Republic of 1/12/2009 SBA -2,270 587 - El Salvador 1/16/2009 SBA -514 300 - Armenia 3/6/2009 SBA -534 580 - Romania 5/4/2009 SBA -11,443 1,111 - Sri Lanka 7/24/2009 SBA 111 1,654 400 - Greece 5/9/2010 SBA -26,433 3,212 - Ukraine II 7/28/2010 SBA 510 10,000 729 - Ireland 12/16/2010 EFF -19,466 1,548 - Portugal 5/20/2011 EFF -23,742 2,306 - St. Kitts 7/27/2011 SBA 255 359 0 - Greece II 3/15/2012 EFF 1,592 23,785 2,159 - Ukraine III 4/30/2014 SBA 157 10,976 800 - Ukraine IV 3/11/2015 EFF 276 12,348 900 Notes: - Liberia's exceptional access arrangement was granted in the context of Liberia's clearance of arrears to the Fund. It excludes the credit outstanding to the PRGF trust. - Excludes the credit outstanding to the PRGF trust for certain entries. *Italic source line: Appendix Table 3. Fund Arrangements with Exceptional Access, 1995–2015 (excerpt).* --- ### Appendix Table 4. Comparing May 2014 with Current Proposals ### GRA access limits (annual and cumulative) - Overall (Current Proposal): Annual 125, Cumul. 375 (May 2014 Proposal shown for comparison: Annual 251, Cumul. 404, % change 2040) - RFI (1/): Current Proposal Annual 50, Cumul. 1000, % change 37.5/75.0; May 2014 Proposal Annual 50 (notes indicate halving after 14th Review) - PLL (2/): Current Proposal Annual 50, Cumul. 10000; May 2014 Proposal Annual 250, Cumul. 5000 (table entries as presented) ### Level-based surcharges (thresholds shown) - Option 1: % quota 1500 ... 17516.7 (table entries show thresholds and % changes) - Option 2: % quota 175-20016.7-33.3 ... 20033.3 - (Table shows alternative threshold comparisons including 200% of quota, 300% of quota, 185% of quota, 150% of quota and differences in income versus 150% reported) ### Time-based surcharges for EFFs (months and increase) - Option 1: No. months 36 0 ... No. months 36 0 - Option 2: No. months 51 15 ... No. months 51 15 ### Commitment Fee threshold (Low/High) - Low/High and % change entries shown: 115-135575-67515-3511557515 (table presents concatenated numbers reflecting thresholds and percent changes) ### Article IV Cycle Threshold - Current Proposal: ...12525 - May 2014 Proposal: ...14040 - (Note: percent change in SDR terms indicated as footnote 4/) ### Projected Fund income from surcharges (Table 1 excerpt) - Current thresholds baseline and projected differences shown for EU members, Other members, Total across quota increase February 1, 2016: - EU members: Current quota entries 2,735; 2,679; 2,677 and differences -193 -195 -267 -269 -377 -378 -1,015 -1,013 (columns for 36m/51m and thresholds) - Other members: 1,635; 1,631; 1,623 and differences -66 -66 -92 -97 -121 -193 -585 -657 - Total: 4,371; 4,309; 4,300 and differences -259 -260 -359 -366 -497 -571 -1,600 -1,670 - Footnotes: - 1/ Includes actual surcharge income for the first six months of FY 2016. - 2/ Members that are subject to higher surcharges following the quota increases and adjustment of thresholds are assumed to be grandfathered under current quotas and thresholds. - 3/ Baseline projections are based on existing active GRA arrangements, current quotas, and the current surcharges policy. It is assumed that Portugal makes early repurchases of SDR 2.8 billion in February and March 2016 and that no further disbursements will be made under Greece's current EFF arrangement. - 4/ Reduction of surcharge income relative to halving the thresholds (150% of quota) as a result of the changes in the thresholds and the time-based trigger for EFF arrangement following the quota increase. *Italic source line: Appendix Table 4. Comparing May 2014 with Current Proposals (excerpt).* --- ### Updated Staff Proposal and Revised Proposed Decisions (February 15, 2016 supplement) ### Key elements of the updated staff proposal - Access limits: - Staff proposes to increase access limits in SDR terms by an average of 45 percent. - Annual and cumulative access limits to be set at 145 percent and 435 percent of the new quota, net of scheduled repurchases (Decision I). - Staff maintains proposal to halve limits for the Precautionary and Liquidity Line when the 14th Review quota increases take effect (Decision II). - Surcharge threshold and time-based triggers: - Level-based surcharge threshold set at 185 percent. - Maintain proposal to extend time-based surcharge trigger for holdings from extended arrangements to 51 months. - Clarification: temporary drop below current 300 percent threshold following quota payments pending effectiveness of new surcharge threshold would not interrupt the 36 and 51 month periods. - For measuring 36 and 51 month periods, the previous 300 percent threshold based on the old quota will be used for any period prior to effectiveness of new thresholds. - Commitment fees and Article IV thresholds: - Commitment fee thresholds maintained at 115 and 575 percent of quota, representing a 15 percent increase on average in SDR terms (Decision IV). - Modify quota-based threshold above which delays in Article IV consultations are not permitted to 145 percent of quota. - Continue recommendation to halve the quota-based threshold for post-program monitoring as a temporary measure (Decisions V and VI). - Effective dates and implementation: - Changes for access, Article IV consultations, and post-program monitoring: effective as of date of Board decision. - New thresholds for surcharges and commitment fees: rolling effectiveness as quota increases under 14th Review become effective but not later than February 26. - Surcharges and commitment fees for members that have paid quota increases will be calculated based on old thresholds and the new quotas for the period from effectiveness of the quota increase to effectiveness of new surcharge and commitment fee thresholds. - Refunds of commitment fees to be made after quota subscriptions paid and revised policy adopted. - Limited grandfathering regime retained. ### Revised proposed decisions (high-level numeric outcomes and amendments) - Decision I (Access Policy and Limits): - Overall access: annual limit of 145 percent of quota; cumulative limit of 435 percent of quota, net of scheduled repurchases. - PLL exceptional access combined limit under PLL arrangements: cumulative limit of 500 percent of quota, net of scheduled repurchases (amendment to paragraph 4). - Decision to be reviewed on an as needed basis. - Decision II (PLL-specific): - Replace references: “1000 percent of quota” -> “500 percent of quota”. - Replace “500 percent of quota” -> “250 percent of quota” where applicable. - Replace “250 percent of quota” -> “125 percent of quota” where applicable. - Decision III (Surcharges): - Rate of charge on combined holdings in excess of [185] percent of quota: - i. 200 basis points per annum above the rate in Rule I-6(4) as adjusted for burden sharing; a threshold of 300 percent shall apply until the earlier of effectiveness date of quota increase under 14th Review or February 26, 2016. - ii. Additional 100 basis points per annum (as adjusted for burden sharing) where holdings outstanding more than 36 months for credit tranches or 51 months for EFF; relevant threshold 300 percent for period prior to effectiveness of member’s quota increase under 14th Review or February 26, 2016; if during February 1 through [February 17, 2016] holdings fell below 300 percent, such interruption shall not be taken into account for calculating the 36 and 51 month periods. - Voting and adoption: - Decisions I, II, V and VI may be approved by a majority of votes cast. - Decisions III and IV require a seventy percent majority of the total voting power, pursuant to Article V, Section 8(d). - Modification of commitment fee policy entails modification of Rule I-8 and would need submission to the Board of Governors for review at next regular meeting pursuant to Section 16 of the Fund’s By-laws. *Italic source line: Updated staff proposal and revised proposed decisions (February 15, 2016 supplement, excerpts). ### 2. A member with credit outstanding in the credit tranches or under the Extended Fund Facility, ### 2. A member with credit outstanding in the credit tranches or under the Extended Fund Facility, ### Applicability and member elections (paragraph 2) - A member with credit outstanding in the credit tranches or under the Extended Fund Facility, or with an arrangement in effect on [February 17, 2016], may notify the Fund by February 25, 2016 that it elects to have the rate of charge on: - existing holdings of the member’s currency, and - holdings of the member’s currency arising from future purchases under such an effective arrangement, - to be based on the threshold of 300 percent member’s quota in effect prior to its quota increase under the 14th General Review of Quotas, instead of the threshold of [185] percent under paragraph 1. - Absent such notification, the rate of charge shall be computed pursuant to paragraphs 1 and 2 above. - If a member has made an election under this paragraph 2, such election shall cease to apply as of the date of the Fund’s approval of any new access to the Fund’s general resources for that member, including an augmentation of an arrangement in effect on [February 17, 2016], and the rate of charge under this Decision shall be computed for all holdings of the member’s currency in the credit tranches or under the Extended Fund Facility pursuant to paragraph 1 above. ### Review of Decision - This Decision shall be reviewed on an as needed basis in accordance with Decision No. 13814-(06/98), adopted November 15, 2006, and Decision No. 15764-(15/39), adopted April 23, 2015, on implementing streamlining of policy reviews. --- ### Decision III: Surcharges on Purchases in the Credit Tranches and Under the Extended Fund Facility — Key provisions - Rate of charge under Article V, Section 8(b) on the Fund’s combined holdings of a member’s currency in excess of 175[185] percent of the member’s quota resulting from purchases in the credit tranches and under the Extended Fund Facility: - i. shall be 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing; provided that the rate of charge shall include an additional 100 basis points per annum above the rate of charge referred to in Rule I-6(4), as adjusted for purposes of burden sharing, on such holdings in excess of the 175 percent threshold that have been outstanding for more than 36 months in the case of purchases in the credit tranches or that have been outstanding for more than 51 months in the case of purchases under the Extended Fund Facility. - A threshold of 300 percent shall apply until the earlier of (i) the effectiveness date of the quota increase under the 14th General Review of Quotas for that member, or (ii) February 26, 2016. - Additional 100 basis points per annum (as adjusted for burden sharing) applies where holdings are outstanding for more than 36 months (credit tranches) or 51 months (Extended Fund Facility); relevant threshold for the pre-quota-increase period is 300 percent. - Interruption rule: if, during the period of February 1 through [February 17, 2016], the Fund’s combined holdings of a member’s currency subject to charges fell below 300 percent of the member’s quota, such interruption shall not be taken into account for purposes of calculating the 36 and 51 month periods. ### Election timing (Decision III, paragraph 2) - A member with credit outstanding in the credit tranches or under the Extended Fund Facility, or with an arrangement in effect on [February 117, 2016], may notify the Fund by the end of the Quota Payment PeriodFebruary 256, 2016 that it elects to have the rate of charge on such existing holdings and on holdings arising from future purchases under such an effective arrangement, to be based on the threshold of 300 percent, instead of the threshold of 175 percent under paragraph 1 above — provided that the threshold of 300 percent would be applied to the member’s quota in effect prior to its quota increase under the 14th General Review of Quotas. - Absent such notification, the rate of charge shall be computed pursuant to paragraphs 1 and 2 above. - If a member has made an election under this paragraph 32, such election shall cease to apply as of the date of the Fund’s approval of any new access to the Fund’s general resources for that member, including an augmentation of an arrangement in effect on [February 117, 2016], and the rate of charge under this Decision shall be computed for all holdings of the member’s currency in the credit tranches or under the Extended Fund Facility pursuant to paragraph 1 above. ### Review clause - This Decision shall be reviewed on an as needed basis in accordance with Decision No. 13814-(06/98), adopted November 15, 2006, and Decision No. 15764-(15/39), adopted April 23, 2015. --- ### Decision IV: Commitment Fees — amended Rule I-8 (applicable to all GRA arrangements) - Charge payable at the beginning of each twelve-month period ("the relevant period") of an arrangement: - (i) 15/100 of 1 percent per annum on amounts of up to 115 percent of the member’s quota that could be purchased during the relevant period; - (ii) 3/10 of 1 percent per annum on amounts in excess of 115 percent and up to 575 percent of the member’s quota that could be purchased during the relevant period; - (iii) 3/5 of 1 percent per annum on amounts in excess of 575 percent of the member’s quota that could be purchased during the relevant period. - Reduction and refund rules when a purchase is made during the relevant period: - (i) If purchases do not exceed 115 percent of the member’s quota, the portion of the charge under (i) is reduced proportionally to the purchase relative to the arrangement amount not exceeding 115 percent. - (ii) If purchases exceed 115 percent but do not exceed 575 percent, the portion of the charge under (ii) is reduced proportionally to the purchase relative to the arrangement amount exceeding 115 percent but not exceeding 575 percent. - (iii) If purchases exceed 575 percent, the portion of the charge under (iii) is reduced proportionally to the purchase relative to the arrangement amount exceeding 575 percent. - Cancellation: - If a member notifies the Fund that it wishes to cancel an arrangement, the Fund shall repay to the member a portion of the charge representing the charge for the period remaining unexpired at the date of cancellation for the amount that could still be purchased under the arrangement at the date of cancellation for which the member has paid a charge. - Media of refund: - Refunds for reductions and repayments of a charge paid for an arrangement shall be made in the media selected by the Fund. - Transitional thresholds prior to quota increase effectiveness or deadline: - Instead of thresholds of 115 percent and 575 percent, thresholds of 200 percent and 1000 percent, respectively, shall be used in computing charges and refunds for a member until the earlier of (i) the effective date of that member’s quota increase under the 14th General Review of Quotas, or February 26, 2016. - Member election (paragraph (f)/(l) variants): - A member with an arrangement in effect on [February 17/117, 2016] may notify the Fund by February 25/26, 2016 (text variants in source) that it elects to have the charges and refunds applicable to such arrangement to be based on the thresholds of 200 percent and 1000 percent of the member’s quota in effect prior to the effectiveness of the quota increase for that member under the 14th General Review of Quotas, instead of the thresholds of 115 percent and 575 percent, respectively. - Absent such notification, relevant charges and refunds shall be determined under subparagraphs (a), (b), (c) and (d) above. - If a member has made an election, such election shall cease to apply as of the date of the Fund’s approval of any augmentation of an arrangement in effect for that member prior to [February 17/117, 2016]. The member shall then be subject to the relevant charges and refunds as determined under subparagraphs (a), (b), (c) and (d). - New arrangements approved by the Fund after [February 17/117, 2016] are not eligible for the election. --- ### Decision I: Access Policy and Limits — revisions (selected amendments) - Overall access by members to the Fund’s general resources shall be subject to: - (i) an annual limit of 140145 percent of quota; and - (ii) a cumulative limit of 420435 percent of quota, net of scheduled repurchases; - provided that these limits will not apply in cases where a member requests a Flexible Credit Line arrangement in the credit tranches, although outstanding holdings arising under such arrangements will be taken into account when applying these limits in cases involving requests for access under other Fund facilities. - Exceptional access under a PLL arrangement (paragraph 4): - When exceptional access is approved under a PLL arrangement pursuant to paragraph 3, such access, combined with the member’s access under other PLL arrangements, shall in no event exceed a cumulative limit of 500 percent of quota, net of scheduled repurchases. - Review timing and clause: - The guidelines for access, the access limits set forth in this Decision, and the experience with access in amounts exceeding these limits shall be reviewed no later than [February 1, 2021], on the basis of all relevant factors, including the magnitude of members’ balance of payments problems and developments in the Fund’s liquidity. - Alternative text: “6. This Decision shall be reviewed on an as needed basis in accordance with Decision No. 15764-(15/39), adopted April 23, 2015, on implementing streamlining of policy reviews.” - Modification safeguard: - Modification of overall access limits shall not cause members to be subject to the exceptional access policy if they were not subject prior to the entrance into effect of this Decision, unless post-entrance the Executive Board approves access in an amount that would cause the member to exceed the overall annual or cumulative access limits set forth. --- ### Decision II: PLL arrangements—selected quota-replacement amendments - Paragraph 4 amendments (selected replacements of percentage thresholds): - Replace “1000 percent of quota” with “500 percent of quota”. - Replace “500 percent of quota” with “250 percent of quota”. - Replace “250 percent of quota” with “125 percent of quota”. - Replace “500 percent of quota” with “250 percent of quota” and replace “250 percent of quota” with “125 percent of quota”. - Replace “500 percent of quota” with “250 percent of quota”. --- ### Decision V: Article IV Consultation Cycles - Amendment to Decision No. 14747-(10/96), paragraph 1(c): - “the member has outstanding credit to the Fund under all facilities above one hundred and forty-five percent (145%) of the member’s quota.” - Variant/redlined text: “the member has outstanding credit to the Fund under all facilities above one hundred and forty-five percent (140145%) of the member’s quota.” --- ### Decision VI: Post-Program Monitoring - In Decision No. 13454-(05/26), as amended, the references to “200 percent of quota” shall be replaced with “100 percent of quota”. --- *Revised Proposed Decisions (Review of Access Limits and Surcharge Policies—Revised Proposed Decisions, February 16, 2016).* ### 1. In Decision No. 14064-(08/18), adopted February 22, 2008, as amended, paragraphs 2, 4 ### _012016 - 1. In Decision No. 14064-(08/18), adopted February 22, 2008, as amended, paragraphs 2, 4 ### Decision I — Access Policy and Overall Access Limits - Paragraph 2 (amended): - Overall access by members to the Fund’s general resources subject to: - (i) an annual limit of 145 percent of quota; and - (ii) a cumulative limit of 435 percent of quota, net of scheduled repurchases. - Exception: these limits will not apply where a member requests a Flexible Credit Line arrangement in the credit tranches, although outstanding holdings of a member’s currency arising under such arrangements will be taken into account when applying these limits in cases involving requests for access under other Fund facilities. - Paragraph 4 (amended): - When exceptional access is approved under a PLL arrangement pursuant to paragraph 3, such access, combined with the member’s access to the Fund’s resources under other PLL arrangements, shall in no event exceed a cumulative limit of 500 percent of quota, net of scheduled repurchases. - Paragraph 6 (amended): - This Decision shall be reviewed on an as needed basis in accordance with Decision No. 15764-(15/39), adopted April 23, 2015, on implementing streamlining of policy reviews. - Transitional provision: - The modification of overall access limits shall not cause members to be subject to the exceptional access policy if they were not subject to the policy prior to entry into effect of this Decision, unless after entry into effect the Executive Board approves access (new arrangement, augmentation of an existing arrangement, or an outright purchase under the RFI) in an amount that would cause the member to exceed the overall annual or cumulative access limits set forth under this decision. ### Decision II — Precautionary and Liquidity Line (PLL) Arrangements (access caps) - Amendments to Decision No. 15017-(11/112), paragraph 4: - Paragraph 4(a): replace “1000 percent of quota” with “500 percent of quota”. - Paragraph 4(b) and 4(b)(i): replace “500 percent of quota” with “250 percent of quota”. - Paragraph 4(c)(i): replace “250 percent of quota” with “125 percent of quota”. - Paragraph 4(c)(ii): replace “500 percent of quota” with “250 percent of quota” and replace “250 percent of quota” with “125 percent of quota”. - Paragraph 4(c)(iii): replace “500 percent of quota” with “250 percent of quota”. ### Decision III — Surcharges on Purchases in the Credit Tranches and Under the Extended Fund Facility - Amendment to Decision No. 12346-(00/117): - Rate of charge under Article V, Section 8(b) on the Fund’s combined holdings of a member’s currency in excess of the surcharge threshold: - Base surcharge rate: 200 basis points per annum above the rate of charge referred to in Rule I-6(4) as adjusted for purposes of burden sharing. - Additional surcharge: an additional 100 basis points per annum, as adjusted for purposes of burden sharing, on such holdings outstanding for more than 36 months (credit tranches) or 51 months (Extended Fund Facility). - Surcharge threshold adjustments and transitional mechanics: - All references to 185 percent in proposed text were replaced with 187.5 percent in the final decision (Executive Board Meeting, February 17, 2016). - Relevant threshold shall be 300 percent instead of 185 percent: - (i) for all members until [February 17, 2016]; and - (ii) for members whose quota increase under the 14th Review was not effective on [February 17, 2016] until the date their quota increase under the 14th General Review becomes effective, or February 26, 2016, whichever is earlier. - If, during February 1 through February 16, 2016, the Fund’s combined holdings of a member’s currency resulting from purchases in the credit tranches and under the Extended Fund Facility fell below 300 percent of the member’s quota, such interruption shall not be taken into account for purposes of calculating the 36 and 51 month periods. - Election for members with existing credit or arrangements on [February 17, 2016]: - May notify the Fund by February 25, 2016 to elect that the rate of charge on existing and future holdings under such effective arrangement be based on the threshold of 300 percent of quota (the pre-14th Review threshold) instead of the threshold of 185 percent (as amended in paragraph 1). - Absent such notification, the rate of charge computed pursuant to paragraphs 1 and 2 as amended. - Any election ceases to apply as of the date of the Fund’s approval of any new access to the Fund’s general resources for that member, including an augmentation of an arrangement in effect on [February 17, 2016]; thereafter the rate of charge computed pursuant to paragraph 1 above applies to all holdings. ### Decision IV — Commitment Fees (Rule I-8 amendments) - Commitment charge payable at the beginning of each twelve-month period ("the relevant period") of an arrangement: - (i) 15/100 of 1 percent per annum on amounts of up to 115 percent of the member’s quota that could be purchased during the relevant period; - (ii) 3/10 of 1 percent per annum on amounts in excess of 115 percent and up to 575 percent of the member’s quota that could be purchased during the relevant period; - (iii) 3/5 of 1 percent per annum on amounts in excess of 575 percent of the member’s quota that could be purchased during the relevant period. - Reductions and refunds when purchases are made during the relevant period: - Pro rata reductions and refunds of the portions of the charge corresponding to the tiers in (i), (ii), (iii) depending on amounts actually purchased. - Cancellation: - Repayment to member of the portion of the charge representing the unexpired period and amount that could still be purchased at date of cancellation. - Alternative thresholds and transitional election: - Instead of thresholds of 115 percent and 575 percent, thresholds of 200 percent and 1000 percent, respectively, shall be used in computing charges and refunds for a member until the earlier of (i) the effective date of that member’s quota increase under the 14th General Review of Quotas, or (ii) February 26, 2016. - A member with an arrangement in effect on [February 17, 2016] may notify the Fund by February 25, 2016 to elect to base charges and refunds on thresholds of 200 percent and 1000 percent (pre-14th Review) instead of 115 percent and 575 percent. Absent notification, charges and refunds determined under subparagraphs (a)–(d). Any election ceases to apply as of the date of the Fund’s approval of any augmentation of an arrangement in effect for that member prior to [February 17, 2016]; new arrangements approved after [February 17, 2016] are not eligible for the election. ### Decision V — Article IV Consultation Cycles - Amendment to Decision No. 14747-(10/96), paragraph 1(c): - 1(c) the member has outstanding credit to the Fund under all facilities above one hundred and forty-five percent (145%) of the member’s quota. ### Decision VI — Post-Program Monitoring (PPM) - Amendment to Decision No. 13454-(05/26): - References to “200 percent of quota” shall be replaced with “100 percent of quota”. *Prepared by Finance, Legal, and Strategy, Policy and Review Departments; Approved by Sean Hagan, Siddharth Tiwari, and Andrew Tweedie.* ### INTRODUCTION _____________________________________________________________________________ 2 ### INTRODUCTION ### Purpose and scope - Addresses an error in the calculation of the impact on the Fund’s income of extending the time-based surcharge threshold from 36 to 51 months for credit arising from purchases under the Extended Fund Facility (EFF). - Clarifies application of the amended Rule I-8 on commitment fees for members whose quota increase under the 14th Review became effective before the adoption of the new thresholds on February 17, 2016. - Date on document: March 28, 2016. ### Key finding - The projected cost to the Fund of the Decision to establish the surcharge threshold of 187.5 percent of quota and lengthen the time-based threshold to 51 months for credit arising from extended arrangements is SDR 489 million over FY 2016-FY 2025. - The methodology used in previous papers would have shown a loss of SDR 410 million over the same period. - Difference between corrected and previous methodology: SDR 79 million. ### Staff action - Error discovered before any impact on members’ charges and had no operational consequences. - Staff assessment of the decision adopted on February 17, 2016, remains that it is appropriate. - Staff is reviewing internal work practices to avoid similar mistakes. --- ### REVISIONS TO SURCHARGE CALCULATIONS - Nature of the error: - Previous calculations assumed grandfathering would be applied so no member would be made worse off relative to existing quotas and thresholds by the combined effect of: (a) extension of the time-based surcharge trigger for EFF arrangements and (b) new level-based surcharge thresholds and quotas. - That assumption followed a more typical package-grandfathering approach (member chooses old package or new package) but did not conform to the actual policy proposal and the decision. - The decision and staff paper were clear that: - the extension of the time-based trigger for EFF purchases would apply to all members immediately, and - grandfathering would be limited to the change in the level-based surcharge thresholds only. - Consequence: - Numbers reported in the earlier paper understated the projected cost to the Fund of the change in policies. - Comparison of projections (as reported in the text and tables): - Projected cost under the agreed policy (187.5 percent threshold; EFF time-based 51 months): SDR 489 million (FY 2016-FY 2025). - Projected cost under previous methodology shown in Supplement 1: SDR 410 million (FY 2016-FY 2025). - Difference: SDR 79 million. - Appendix: - Provides detailed comparison between the original and corrected calculations. - Panel A restates Table 1 from the Supplement, with addition of columns showing the impact of a surcharge threshold of 187.5 percent of quota. - Panel B presents a correction of the projections shown in Panel A. --- ### APPLICATION OF THE COMMITMENT FEES DECISION - Effective dates and treatment: - New commitment fee thresholds under Rule I-8 became effective on a rolling basis from the date of the Board decision (February 17, 2016) as quota increases under the 14th Review became effective but no later than February 26. - For members whose quota increase had become effective before February 17, the commitment fee would be calculated based on the old thresholds and their new quotas for the interim period from the effectiveness of the quota increase to February 17—the new thresholds would not apply retroactively to such members. - Although non-retroactivity is not explicitly reflected in amended Rule I-8(e), it is mandated under the Fund’s general legal framework, which does not permit retroactive increases of charges outside of a system of pre-determined and objectively defined criteria. - For members who paid their quota increases before February 17, refunds of commitment fees were paid on the basis of the old thresholds and new quotas for the interim period, consistent with the staff proposal. --- ### Projected Fund Income and Table Highlights (FY 2016 to FY 2025) - Aggregate reported surcharge income rows (selected values preserved exactly as in source): - Panel A / Pre-14th Review quotas / Old Thresholds: - EU members: 2,735 - Other members: 1,635 - Total: 4,371 - Note: "Includes actual surcharge income for the first six months of FY 2016." - Panel A / Quota increase February 1, 2016 / Old Thresholds: - EU members: 2,731 2,679 2,674 (as presented in table rows) - Other members: 1,521 1,631 1,516 - Total: 4,252 4,309 4,190 (as presented) - Panel B: Revised Implementation of Grandfathering (selected values): - EU members (examples shown): 2,679 2,677 2,411 2,408 2,393 2,390 (table sequence) - Other members (examples shown): 1,631 1,623 1,539 1,526 1,533 1,510 (table sequence) - Total (examples shown): 4,309 4,300 3,950 3,934 3,926 3,899 (table sequence) - Appendix Table 1 (Projected Change in Fund Income from Surcharges under Various Thresholds; selected differences): - Panel A (excerpted change values shown in source): - EU members adjustments: -2 -193 -195 -267 -269 -286 -287 -377 -378 - Other members adjustments: -7 -66 -66 -92 -97 -97 -114 -121 -193 - Total adjustments: -9 -259 -260 -359 -366 -383 -401 -497 -571 - Panel B (excerpted revised change values shown in source): - EU members adjustments: -5 -193 -192 -267 -266 -286 -285 -377 -375 - Other members adjustments: -114 -66 -59 -92 -81 -97 -85 -121 -107 - Total adjustments: -119 -259 -251 -359 -347 -383 -370 -497 -482 - Combined impact line in Appendix: -259 -361 -359 -457 -383 -480 -497 -592 - Difference versus Panel A line in Appendix: -110 - -101 - -90 - -79 - -21 (values presented in source format) - Assumptions noted in tables and appendix (preserved exactly as written): - It is assumed that Portugal makes early repurchases of SDR 1.2 billion in March 2016. - Projections are based on existing active GRA arrangements, pre-14th Review quotas, old level-based surcharges threshold of 300%, and the new time-based surcharge trigger of 51 months for EFF and 36 months for non-EFF arrangements (where specified in table notes). - Members that are subject to higher surcharges following the quota increases and adjustment of thresholds are assumed to be grandfathered under old quotas and thresholds (where specified in table notes). --- *Source: Review of Access Limits and Surcharge Policies (Supplement), March 28, 2016.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_012016.pdf_