## _102416 - EXECUTIVE SUMMARY

## Source details

**Canonical URL:** [_102416 - EXECUTIVE SUMMARY](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_102416.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_102416.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_102416.pdf.json)

---

### Overview and purpose
- Since 2010, 56 percent of Fund arrangements have involved a PRGT-facility.
- The paper examines issues raised by Executive Directors and the IMFC since the June 2015 staff paper on enhancing the financial safety net for developing countries (IMF, 2015a).
- Conclusion: need to clarify guidance on some PRGT policies; early revision of the LIC Handbook is underway. The paper does not propose changes to the Fund’s concessional facilities at this juncture.
- A comprehensive review of PRGT resources and facilities is planned for 2018.
- Date on document: October 24, 2016.

### Key findings on use and eligibility
- Since the 2009 overhaul of concessional facilities:
  - 35 members have had arrangements supported through the PRGT.
  - The 60 arrangements supported by the PRGT accounted for 53 percent of all Fund arrangements in the period.
- Currently 69 members are deemed PRGT-eligible.
  - This grouping accounts for around 2.7 percent of world GDP (PPP-basis) and 14.5 percent of the world’s population.
- PRGT-eligible members are not obliged to use PRGT financing and have the right to access GRA resources on the same conditions as any other Fund member.

### Access to GRA facilities (principles and guidance)
- All Fund members are eligible to access GRA resources under Article V, Section 3(b).
- PRGT-eligible members:
  - Can access GRA resources on the same terms as other members.
  - Are encouraged to borrow first from the PRGT up to applicable limits because PRGT financing carries lower interest rates, longer maturities, and longer grace periods.
  - If balance of payments (BoP) needs exceed PRGT access limits, or the member prefers, GRA support may be considered subject to GRA policies.

### Blending of PRGT and GRA resources (policy and practice)
- Two sub-groups of PRGT-eligible members:
  - Presumed blenders.
  - Not presumed to blend (NPB).
- Current counts and assessments:
  - 23 of the 69 PRGT-eligible members fall into the presumed blender grouping.
  - As of end-August 2016, 37 PRGT-eligible members meet the income and market access criteria under the blending policies; however, 14 of these members are assessed to be at high risk of debt distress or in debt distress and thus not presumed to blend.
- Presumed blenders:
  - Expected to access PRGT resources only via a mix of PRGT and GRA resources.
  - Blending ratio (up to a cap on concessional resources): 1:2 (PRGT:GRA).
  - Above the cap, incremental financing is sourced entirely from the GRA.
  - The cap depends on facility type: set at the applicable norm for the SCF and the ECF and the applicable access limit for the RCF (see LIC Handbook for detailed caps).
- Non-presumed blenders (NPB):
  - Can access PRGT resources exclusively up to the applicable PRGT access limits.
  - Are not precluded from requesting GRA resources, but are expected to first seek PRGT facilities.
- Clarification to LIC Handbook:
  - Wording on “exceptional circumstances, when financing needs exceed the applicable access limits—notably in cases of clearance of protracted arrears to the Fund—blending could be used irrespective of the per capita income, market access, and debt sustainability criteria” will be clarified.
  - Clarification will state that the wording reflects the rarity of cases when financing needs exceed PRGT limits and does not imply that only in exceptional cases may certain members access the GRA.
  - Every PRGT-eligible member, whether a presumed blender or not, has access to GRA resources provided it meets applicable GRA policies (program strength, capacity to repay, debt sustainability).

### PRGT access and the role of norms
- Access determination uses the standard criteria applied to all Fund financing:
  - (i) size of the balance of payments need;
  - (ii) strength of the authorities’ program;
  - (iii) capacity to repay; and
  - (iv) Fund credit outstanding and track record of past use.
- PRGT assistance is subject to access limits, including hard limits for exceptional access:
  - To qualify for PRGT exceptional access, a member must be assessed as having income at or below the prevailing IDA operational cutoff and meet the following: (i) faces an exceptionally large BoP need, (ii) has a comparatively strong adjustment program and ability to repay the Fund, and (iii) does not have sustained past and prospective access to capital markets.
  - Exceptional PRGT access is capped at 300 percent of quota on a cumulative basis net of scheduled repayments and at 100 percent on an annual basis.

### Precautionary support and RCF-related issues
- Precautionary Support:
  - Staff does not see a case at this time for establishing new concessional facilities targeted specifically at meeting precautionary needs of PRGT-eligible members.
- Rapid Credit Facility (RCF) repeated use:
  - Staff considers existing safeguards adequate to prevent repeated use of the RCF as a substitute for arrangements with ex post conditionality.
- RCF and Staff-Monitored Program (SMP):
  - For countries receiving RCF support while seeking to build a track record towards an Upper Credit Tranche (UCT)-quality program, staff will more systematically promote use of SMP for track record purposes in place of policy commitments made under the RCF.

### Conclusions and next steps
- No immediate changes proposed to the Fund’s concessional facilities.
- Clarifications will be provided via an early revision of the LIC Handbook to sharpen guidance on:
  - Access to GRA by PRGT-eligible members;
  - Blending policy and its application;
  - Role of access norms and case-by-case application of standard access criteria.
- A comprehensive review of PRGT resources and facilities is planned for 2018.

### Access norms: purpose, usage, and guidance
- Access norms apply only to PRGT financing and are intended to provide general guidance.
- Norms are neither ceilings nor floors to access and should not be viewed as entitlements.
- Norms are lower for members with significant outstanding PRGT credit because concessional resources are scarce.
- Norms can guide access-setting where the balance of payments need is difficult to determine.
- Norms play an important role in estimating the self-sustained annual level of concessional lending from the PRGT: average access at the norm should not pose risks to PRGT self-sustainability for projected demand (expressed as a percent of eligible members seeking Fund support) under a range of plausible circumstances.
- For presumed blenders, the norm serves as the cap for financing from PRGT resources.
- Since 2010, program access relative to the norm:
  - 42 percent of SCF/ECF-supported programs have involved access at the norm.
  - 38 percent involved access below the norm (all cases involving states in a fragile situation).
  - 20 percent involved access above the norm.
- Staff will strengthen existing guidance on the use of PRGT access norms.
- Norms should inform assessments of access levels but not be construed as limits or entitlements.
- Significant variation of access relative to the norm is to be expected in practice.

### Access to precautionary financial support (SCF and PSI) and experience
- PRGT-eligible members can use the SCF on a precautionary or disbursing basis; precautionary use is appropriate to address a potential short-term balance of payments need.
- During an SCF arrangement, authorities can request an augmentation if unexpected acute balance of payments needs exceed the arrangement size.
- LICs without an actual or potential balance of payments need can request non-financial assistance under the Policy Support Instrument (PSI).
  - PSI is for policy advice and signaling, and (i) supports LICs that are in a broadly stable macroeconomic position at the time of approval and thus do not need IMF financial assistance; and (ii) can provide accelerated access to the SCF in case of subsequent financial needs.
- Since 2010, 6 members have requested 11 PSIs.
- Examples of precautionary arrangements:
  - Stand-alone precautionary SCFs approved and later drawn: Solomon Islands (2011); Tanzania (2012).
  - Blended precautionary SCF and SBA arrangements approved (no draws to date): Honduras (2010 and 2014); Georgia (2012); Kenya (2015 and 2016).
  - Kenya 2016 example: large financing package with access equivalent to 196 percent of quota illustrating significant precautionary support via existing facilities.
- Staff view: blending PRGT and GRA resources (through an SCF and SBA blend) already provides sufficient precautionary financing for presumed blenders; non-presumed blenders can access SCF up to prevailing limits and a precautionary SBA if needed.
- PRGT-eligible members may request access under any other GRA facility or instrument if they meet qualification criteria.
- Assessment could be revisited if changes to the GRA toolkit occur that assist members facing potential balance of payments needs on a precautionary basis.

### Repeated use of the RCF: features, safeguards, and staff actions
- Purpose: RCF provides rapid concessional financial assistance with limited conditionality to PRGT-eligible members facing an urgent balance of payments need.
- Concerns: potential moral hazard or “facilities shopping” (repeated use of RCF instead of a conventional multiple-disbursement arrangement with UCT-quality policies and ex post conditionality).
- Scope for repeated use:
  - Repeated use within any three-year period is possible if (i) the balance of payments need is caused primarily by an exogenous shock or (ii) the country has established a track record of adequate macroeconomic policies for about six months prior to the request.
  - No more than two disbursements may be made in any 12-month period.
- RCF role in fragile situations:
  - RCF enhances Fund engagement flexibility where a full-fledged economic program is not feasible owing to capacity constraints or domestic fragilities.
  - Repeated RCF use could help meet urgent needs during initial transition phases of entrenched fragility and may facilitate eventual transition to an ECF arrangement.
- Staff view:
  - Existing safeguards are adequate to prevent repeated use of the RCF as a substitute for a conventional arrangement (such as an ECF or SCF).
  - Analysis of past usage does not point to misuse or facilities shopping.
  - Three members that made repeated RCF use through the “normal window” were fragile states that used RCF while building a track record for a UCT-quality arrangement; all three moved to longer-term engagement with the Fund.
  - Monitoring frameworks established at time of RCF requests have been used to help members build track records for a UCT-quality program (via SMPs or informal monitoring targets described in Letters of Intent).
- Staff actions on track-record building:
  - Staff will promote the use of SMPs, rather than policy commitments under the RCF, to build a track record towards a UCT-quality program.
  - Rationale: SMP provides a clear and explicit framework to establish a policy track record and facilitate transition to a UCT-quality program.
  - For repeat RCF disbursement requests, the existing framework remains adequate; the track record may be based on:
    - Policy commitments in a recent RCF disbursement,
    - Performance under an SMP (if any), or
    - Performance under any other Fund-supported program.

### Concerns about emergency credit access for small states and next steps
- Several Executive Directors questioned whether emergency credit facility access levels (RCF and RFI) are sufficient for smaller states, where disaster costs relative to GDP can be much larger.
- A forthcoming Board paper—“Small States’ Resilience to Natural Disasters and Climate Change: Role for the IMF”—will examine strengthening Fund engagement with countries particularly vulnerable to severe natural disasters.
- Paper conclusions reiterated:
  - (i) At this juncture, there is not a case for establishing new concessional precautionary facilities targeted specifically at PRGT-eligible members.
  - (ii) Current safeguards on RCF use are adequate to contain risks of moral hazard and facilities shopping.
  - (iii) Staff will more systematically promote the use of the SMP to build a track record towards a UCT-quality program instead of ad hoc informal monitoring set in an RCF request.
- A comprehensive review of PRGT resources and facilities is to be undertaken in 2018.

### Issues for Discussion (questions posed to Directors)
- Do Directors agree that, at this juncture, there is not a case for establishing new concessional precautionary facilities targeted specifically at PRGT-eligible members? (25)
- Do Directors agree that the current safeguards on RCF use are adequate to contain risks of moral hazard and facilities shopping? (26)
- Do Directors agree that staff should more systematically promote the use of the SMP to build a track record towards a UCT-quality program, instead of ad hoc informal monitoring set in an RCF request? (27)

### Box 3 summary points on RCF usage and safeguards
- RCF introduced in 2010; used frequently by PRGT-eligible members.
- RCF provides single-disbursement rapid concessional financing with no ensuing disbursements subject to ex post conditionality, though approval may be linked to prior actions.
- Repeated use allowed under circumstances subject to cumulative credit limits.
- Safeguards:
  - Ceilings on access under the RCF and specific limitations on repeated use (no more than two disbursements in any 12-month period).
  - Board will not approve an additional RCF disbursement within three years unless (i) BOP need caused primarily by a sudden, exogenous shock (“shocks window”); or (ii) member has established a track record of adequate macroeconomic policies in the six months preceding the request.
  - RCF can only be used if a Fund-supported program with UCT-conditionality standard is not feasible or necessary.
- Usage statistics since introduction:
  - RCF approved on 24 occasions, representing one-third of all PRGT requests during the period and over one-half in 2014–15.
  - 24 requests came from 16 members, including nine states in a fragile situation and five small states.
  - Two RCF windows used about equally:
    - “Shocks window”: 13 requests—nine natural disasters, three Ebola-related, one global economic crisis.
    - “Normal window”: 11 requests—primarily from fragile/post-conflict situations.
  - All non-exogenous-shock RCF requests included a quantitative monitoring framework covering at least three months; half had prior actions (one to three per request).
  - Of seven members who requested RCFs to meet urgent needs while establishing a track record, all but one transitioned to an ECF within a year.
  - Six members used the RCF more than once (two small states, four fragile states). Three members requested two disbursements from the shocks window; one made two requests within 12 months. Three members made multiple requests while building a track record (one had three requests, two had two each). All three of these used quantitative monitoring frameworks (one used a parallel SMP; others used informal frameworks in Letters of Intent).

### Appendix Table 1 — selected norms, limits, and procedural safeguards (figures preserved)
- Cumulative access limits (All PRGT facilities)
  - Normal: 225
  - Exceptional: 300
- Cumulative access limits (RCF)
  - Normal2/: 75
  - Exogenous shocks window /2: 75
- Cumulative access limits (RFI)
  - 75
- Annual access limits (All PRGT-facilities)
  - Normal: 75
  - Exceptional: 100
- SCF (precautionary)
  - Average annual: 37.5
  - At approval: 56.25
- RCF annual limits
  - Normal2/: 18.75
  - Exogenous shocks window /2: 37.5
- RFI annual limit
  - 37.5
- Norms3/
  - 3-year ECF4/:
    - High access: 90
    - Low access: 56.25
  - 18-month SCF5/:
    - High access: 90
    - Low access: 56.25
- Blending proportions (PRGT:GRA) for members presumed to blend6/
  - 1:2 with concessional access capped at the applicable norm (all GRA thereafter)
- Procedural safeguards
  - New DSA7/: Total access in any 24-month period: 60
  - Informal Board Meeting in advance of new PRGT request /8: Total access in any 36-month period: 135

- Footnote excerpts (as in source):
  - 2/ Any RFI access also counts towards these limits.
  - 3/ High access norms apply if PRGT credit outstanding is less than 75 percent of quota. Norms are not applicable if PRGT credit outstanding >150 percent of quota.
  - 4/ For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. For countries whose outstanding PRGT access is above 150 percent of quota, the norms do not apply.
  - 5/ For SCF arrangements of any other length, the norms will be proportionately adjusted to keep annualized average access unchanged.
  - 6/ For the RCF, which has no norm, the cap on access to concessional resources is the annual limit, while for the SCF treated as precautionary this cap applies to the average annual access limit.
  - 7/ A new DSA is also required for any PRGT financing request if it involves exceptional access to concessional resources or involves a member country with a high risk of debt distress or in debt distress.
  - 8/ An early informal Board meeting is also required if the financial request would involve exceptional access to concessional financing.
  - 1/ The new access limits in effect January 26, 2016 do not affect disbursements under arrangements approved prior to that date and any changes in access levels is to be justified by balance of payments needs in accordance with the standard policies for augmentation of access amounts. Outstanding PRGT credit in existence as of January 26, 2016 counts towards the current annual and cumulative PRGT access limits.

*Source: _102416 - EXECUTIVE SUMMARY (IMF) — October 24, 2016.*

### EXECUTIVE SUMMARY

### _102416 - EXECUTIVE SUMMARY

### Overview and purpose
- Since 2010, 56 percent of Fund arrangements have involved a PRGT-facility.  
- The paper examines issues raised by Executive Directors and the IMFC since the June 2015 staff paper on enhancing the financial safety net for developing countries (IMF, 2015a).  
- Conclusion: need to clarify guidance on some PRGT policies; early revision of the LIC Handbook is underway. The paper does not propose changes to the Fund’s concessional facilities at this juncture. A comprehensive review of PRGT resources and facilities is planned for 2018.  
- Date on document: October 24, 2016.

### Key findings on use and eligibility
- Since the 2009 overhaul of concessional facilities:
  - 35 members have had arrangements supported through the PRGT.
  - The 60 arrangements supported by the PRGT accounted for 53 percent of all Fund arrangements in the period.
- Currently 69 members are deemed PRGT-eligible.
  - This grouping accounts for around 2.7 percent of world GDP (PPP-basis) and 14.5 percent of the world’s population.
- PRGT-eligible members are not obliged to use PRGT financing and have the right to access GRA resources on the same conditions as any other Fund member.

### Access to GRA facilities (principles and guidance)
- All Fund members are eligible to access GRA resources under Article V, Section 3(b).
- PRGT-eligible members:
  - Can access GRA resources on the same terms as other members.
  - Are encouraged to borrow first from the PRGT up to applicable limits because PRGT financing carries lower interest rates, longer maturities, and longer grace periods.
  - If balance of payments (BoP) needs exceed PRGT access limits, or the member prefers, GRA support may be considered subject to GRA policies.

### Blending of PRGT and GRA resources (policy and practice)
- Two sub-groups of PRGT-eligible members:
  - Presumed blenders.
  - Not presumed to blend (NPB).
- Current counts and assessments:
  - Currently, 23 of the 69 PRGT-eligible members fall into the presumed blender grouping.
  - As of end-August 2016, 37 PRGT-eligible members meet the income and market access criteria under the blending policies; however, 14 of these members are assessed to be at high risk of debt distress or in debt distress and thus not presumed to blend.
- Presumed blenders:
  - Expected to access PRGT resources only via a mix of PRGT and GRA resources.
  - Blending ratio (up to a cap on concessional resources): 1:2 (PRGT:GRA).
  - Above the cap, incremental financing is sourced entirely from the GRA.
  - The cap depends on facility type: set at the applicable norm for the SCF and the ECF and the applicable access limit for the RCF (see LIC Handbook for detailed caps).
- Non-presumed blenders (NPB):
  - Can access PRGT resources exclusively up to the applicable PRGT access limits.
  - Are not precluded from requesting GRA resources, but are expected to first seek PRGT facilities.
- Clarification to LIC Handbook:
  - The phrase on “exceptional circumstances, when financing needs exceed the applicable access limits—notably in cases of clearance of protracted arrears to the Fund—blending could be used irrespective of the per capita income, market access, and debt sustainability criteria” will be clarified.
  - Clarification will state that the wording reflects the rarity of cases when financing needs exceed PRGT limits and does not imply that only in exceptional cases may certain members access the GRA.
  - Every PRGT-eligible member, whether a presumed blender or not, has access to GRA resources provided it meets applicable GRA policies (program strength, capacity to repay, debt sustainability).

### PRGT access and the role of norms
- Access determination uses the standard criteria applied to all Fund financing:
  - (i) size of the balance of payments need;
  - (ii) strength of the authorities’ program;
  - (iii) capacity to repay; and
  - (iv) Fund credit outstanding and track record of past use.
- PRGT assistance is subject to access limits, including hard limits for exceptional access:
  - To qualify for PRGT exceptional access, a member must be assessed as having income at or below the prevailing IDA operational cutoff and meet the following: (i) faces an exceptionally large BoP need, (ii) has a comparatively strong adjustment program and ability to repay the Fund, and (iii) does not have sustained past and prospective access to capital markets.
  - Exceptional PRGT access is capped at 300 percent of quota on a cumulative basis net of scheduled repayments and at 100 percent on an annual basis.

### Precautionary support and RCF-related issues
- Precautionary Support:
  - Staff does not see a case at this time for establishing new concessional facilities targeted specifically at meeting precautionary needs of PRGT-eligible members.
- Rapid Credit Facility (RCF) repeated use:
  - Staff considers existing safeguards adequate to prevent repeated use of the RCF as a substitute for arrangements with ex post conditionality.
- RCF and Staff-Monitored Program (SMP):
  - For countries receiving RCF support while seeking to build a track record towards an Upper Credit Tranche (UCT)-quality program, staff will more systematically promote use of SMP for track record purposes in place of policy commitments made under the RCF.

### Conclusions and next steps
- No immediate changes proposed to the Fund’s concessional facilities.
- Clarifications will be provided via an early revision of the LIC Handbook to sharpen guidance on:
  - Access to GRA by PRGT-eligible members;
  - Blending policy and its application;
  - Role of access norms and case-by-case application of standard access criteria.
- A comprehensive review of PRGT resources and facilities is planned for 2018.

*Source: _102416 - EXECUTIVE SUMMARY (IMF) — October 24, 2016.*

### 14.      Access norms, which apply only to PRGT financing, are intended to provide general

### 14.      Access norms, which apply only to PRGT financing, are intended to provide general

### Access norms: purpose and usage
- Access norms apply only to PRGT financing and are intended to provide general guidance.
- Norms are neither ceilings nor floors to access and should not be viewed as entitlements.
- Norms are lower for members with significant outstanding PRGT credit because concessional resources are scarce.
- Norms can guide access-setting where the balance of payments need is difficult to determine.
- Norms play an important role in estimating the self-sustained annual level of concessional lending from the PRGT: average access at the norm should not pose risks to PRGT self-sustainability for projected demand (expressed as a percent of eligible members seeking Fund support) under a range of plausible circumstances.
- For presumed blenders, the norm serves as the cap for financing from PRGT resources.
- Since 2010, program access relative to the norm:
  - 42 percent of SCF/ECF-supported programs have involved access at the norm.
  - 38 percent involved access below the norm (all cases involving states in a fragile situation).
  - 20 percent involved access above the norm.

### Strengthening guidance on norms
- Staff will strengthen existing guidance on the use of PRGT access norms.
- Norms should neither automatically restrict nor extend access; access should be determined case-by-case (as described in paragraph 11 of the source).
- Norms should inform assessments of access levels but not be construed as limits or entitlements.
- Significant variation of access relative to the norm is to be expected in practice.

### Access to precautionary financial support (SCF and PSI)
- PRGT-eligible members can use the SCF on a precautionary or disbursing basis; precautionary use is appropriate to address a potential short-term balance of payments need.
- During an SCF arrangement, authorities can request an augmentation if unexpected acute balance of payments needs exceed the arrangement size.14
- LICs without an actual or potential balance of payments need can request non-financial assistance under the Policy Support Instrument (PSI).15
- PSI is for policy advice and signaling, and (i) supports LICs that are in a broadly stable macroeconomic position at the time of approval and thus do not need IMF financial assistance; and (ii) can provide accelerated access to the SCF in case of subsequent financial needs.
- Since 2010, 6 members have requested 11 PSIs.

### Experience with precautionary arrangements (examples)
- Stand-alone precautionary SCFs approved and later drawn:
  - Solomon Islands (2011)
  - Tanzania (2012)
- Blended precautionary SCF and SBA arrangements approved (no draws to date):
  - Honduras (2010 and 2014)
  - Georgia (2012)
  - Kenya (2015 and 2016)
- Kenya 2016 example: large financing package with access equivalent to 196 percent of quota illustrating significant precautionary support via existing facilities.

### Staff assessment on new concessional precautionary facilities
- At this juncture, staff does not see a case for establishing new concessional precautionary facilities targeted specifically at PRGT-eligible members.
- For presumed blenders, blending PRGT and GRA resources (through an SCF and SBA blend) already provides sufficient financing, including precautionary support.
- For non-presumed blenders, precautionary financing is available through the SCF up to prevailing access limits; additional financing can be provided through a precautionary SBA.
- PRGT-eligible members may request access under any other GRA facility or instrument if they meet qualification criteria.
- This assessment could be revisited if changes to the GRA toolkit occur that assist members facing potential balance of payments needs on a precautionary basis.16

### Repeated use of the RCF: features, concerns, and evidence
- Purpose: RCF provides rapid concessional financial assistance with limited conditionality to PRGT-eligible members facing an urgent balance of payments need.17
- Concerns: potential moral hazard or “facilities shopping” (repeated use of RCF instead of a conventional multiple-disbursement arrangement with UCT-quality policies and ex post conditionality).
- Scope for repeated use:
  - Repeated use within any three-year period is possible if (i) the balance of payments need is caused primarily by an exogenous shock or (ii) the country has established a track record of adequate macroeconomic policies for about six months prior to the request.
  - No more than two disbursements may be made in any 12-month period.
- RCF role in fragile situations:
  - RCF enhances Fund engagement flexibility where a full-fledged economic program is not feasible owing to capacity constraints or domestic fragilities.
  - Repeated RCF use could help meet urgent needs during initial transition phases of entrenched fragility and may facilitate eventual transition to an ECF arrangement.18
- Staff view:
  - Existing safeguards are adequate to prevent repeated use of the RCF as a substitute for a conventional arrangement (such as an ECF or SCF).
  - Analysis of past usage does not point to misuse or facilities shopping (see Box 3).
  - Three members that made repeated RCF use through the “normal window” were fragile states that used RCF while building a track record for a UCT-quality arrangement; all three moved to longer-term engagement with the Fund.
  - Monitoring frameworks established at time of RCF requests have been used to help members build track records for a UCT-quality program (via SMPs or informal monitoring targets described in Letters of Intent).

### Staff actions on track-record building
- Staff will promote the use of SMPs, rather than policy commitments under the RCF, to build a track record towards a UCT-quality program.
- Rationale:
  - SMP provides a clear and explicit framework to establish a policy track record and facilitate transition to a UCT-quality program.
  - Relying on ad hoc monitorable targets in RCF requests is less preferable because the RCF has no formal ex post conditionality and can be confusing.
- For repeat RCF disbursement requests, the existing framework remains adequate; the track record may be based on:
  - Policy commitments in a recent RCF disbursement,
  - Performance under an SMP (if any), or
  - Performance under any other Fund-supported program.

### Concerns about emergency credit access for small states
- Several Executive Directors questioned whether emergency credit facility access levels (RCF and RFI) are sufficient for smaller states, where disaster costs relative to GDP can be much larger.
- A forthcoming Board paper—“Small States’ Resilience to Natural Disasters and Climate Change: Role for the IMF”—will examine strengthening Fund engagement with countries particularly vulnerable to severe natural disasters.

### Conclusions
- Staff considers a change in the Fund architecture for concessional lending to LICs is not warranted at present.
- Clarifications and improved guidance on implementation of existing policies can largely be achieved through strengthening segments of the LIC Handbook; staff expects to complete this speedily.
- Paper conclusions:
  - (i) At this juncture, there is not a case for establishing new concessional precautionary facilities targeted specifically at PRGT-eligible members.
  - (ii) Current safeguards on RCF use are adequate to contain risks of moral hazard and facilities shopping.
  - (iii) Staff will more systematically promote the use of the SMP to build a track record towards a UCT-quality program instead of ad hoc informal monitoring set in an RCF request.
- A comprehensive review of PRGT resources and facilities is to be undertaken in 2018, in accordance with the normal five-year cycle for such reviews.

### Issues for Discussion (questions posed to Directors)
- Do Directors agree that, at this juncture, there is not a case for establishing new concessional precautionary facilities targeted specifically at PRGT-eligible members? (25)
- Do Directors agree that the current safeguards on RCF use are adequate to contain risks of moral hazard and facilities shopping? (26)
- Do Directors agree that staff should more systematically promote the use of the SMP to build a track record towards a UCT-quality program, instead of ad hoc informal monitoring set in an RCF request? (27)

### Box 3 (summary points on RCF usage and safeguards)
- RCF introduced in 2010; used frequently by PRGT-eligible members.
- RCF provides single-disbursement rapid concessional financing with no ensuing disbursements subject to ex post conditionality, though approval may be linked to prior actions.
- Repeated use allowed under circumstances subject to cumulative credit limits (Appendix Table 1).
- Safeguards:
  - Ceilings on access under the RCF and specific limitations on repeated use (no more than two disbursements in any 12-month period).
  - Board will not approve an additional RCF disbursement within three years unless (i) BOP need caused primarily by a sudden, exogenous shock (“shocks window”); or (ii) member has established a track record of adequate macroeconomic policies in the six months preceding the request.
  - RCF can only be used if a Fund-supported program with UCT-conditionality standard is not feasible or necessary.
- Usage statistics since introduction:
  - RCF approved on 24 occasions, representing one-third of all PRGT requests during the period and over one-half in 2014–15.
  - 24 requests came from 16 members, including nine states in a fragile situation and five small states.
  - Two RCF windows used about equally:
    - “Shocks window”: 13 requests—nine natural disasters, three Ebola-related, one global economic crisis.
    - “Normal window”: 11 requests—primarily from fragile/post-conflict situations.
  - All non-exogenous-shock RCF requests included a quantitative monitoring framework covering at least three months; half had prior actions (one to three per request).
  - Of seven members who requested RCFs to meet urgent needs while establishing a track record, all but one transitioned to an ECF within a year.
  - Six members used the RCF more than once (two small states, four fragile states). Three members requested two disbursements from the shocks window; one made two requests within 12 months. Three members made multiple requests while building a track record (one had three requests, two had two each). All three of these used quantitative monitoring frameworks (one used a parallel SMP; others used informal frameworks in Letters of Intent).

### Appendix Table 1: summary of norms, limits, and procedural safeguards (selected figures)
- Cumulative access limits (All PRGT facilities)
  - Normal: 225
  - Exceptional: 300
- Cumulative access limits (RCF)
  - Normal2/: 75
  - Exogenous shocks window /2: 75
- Cumulative access limits (RFI)
  - 75
- Annual access limits (All PRGT-facilities)
  - Normal: 75
  - Exceptional: 100
- SCF (precautionary)
  - Average annual: 37.5
  - At approval: 56.25
- RCF annual limits
  - Normal2/: 18.75
  - Exogenous shocks window /2: 37.5
- RFI annual limit
  - 37.5
- Norms3/
  - 3-year ECF4/:
    - High access: 90
    - Low access: 56.25
  - 18-month SCF5/:
    - High access: 90
    - Low access: 56.25
- Blending proportions (PRGT:GRA) for members presumed to blend6/
  - 1:2 with concessional access capped at the applicable norm (all GRA thereafter)
- Procedural safeguards
  - New DSA7/: Total access in any 24-month period: 60
  - Informal Board Meeting in advance of new PRGT request /8: Total access in any 36-month period: 135

- Footnote excerpts (as in source):
  - 2/ Any RFI access also counts towards these limits.
  - 3/ High access norms apply if PRGT credit outstanding is less than 75 percent of quota. Norms are not applicable if PRGT credit outstanding >150 percent of quota.
  - 4/ For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. For countries whose outstanding PRGT access is above 150 percent of quota, the norms do not apply.
  - 5/ For SCF arrangements of any other length, the norms will be proportionately adjusted to keep annualized average access unchanged.
  - 6/ For the RCF, which has no norm, the cap on access to concessional resources is the annual limit, while for the SCF treated as precautionary this cap applies to the average annual access limit.
  - 7/ A new DSA is also required for any PRGT financing request if it involves exceptional access to concessional resources or involves a member country with a high risk of debt distress or in debt distress.
  - 8/ An early informal Board meeting is also required if the financial request would involve exceptional access to concessional financing.
  - 1/ The new access limits in effect January 26, 2016 do not affect disbursements under arrangements approved prior to that date and any changes in access levels is to be justified by balance of payments needs in accordance with the standard policies for augmentation of access amounts. Outstanding PRGT credit in existence as of January 26, 2016 counts towards the current annual and cumulative PRGT access limits.

*Source: IMF FFD—FURTHER CONSIDERATIONS (excerpts from the supplied content).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_102416.pdf_