Press Release: IMF Executive Board Approves New Two-Year US$30 Billion Flexible Credit Line Arrangement for Poland
IMF News, January 21, 2011
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Bibliographic details
- Published: January 21, 2011
Approval details and key figures
- Press Release No. 11/15; January 21, 2011.
- Executive Board approved a successor two-year arrangement for Poland under the Flexible Credit Line (FCL) in an amount equivalent to SDR 19.17 billion (about US$30 billion, or 1,400 percent of quota).
- Poland’s first FCL arrangement was approved on May 6, 2009 (Press Release No. 09/153).
- A successor arrangement was approved on July 2, 2010 (Press Release No. 10/276).
- The Polish authorities have stated that they intend to treat the arrangement as precautionary and do not intend to draw on the FCL.
IMF assessment and rationale (statement by Mr. John Lipsky, First Deputy Managing Director and Acting Chairman of the Board)
- Poland’s macroeconomic performance was strong in the decade leading up to the global crisis, supported by sound economic policies.
- Specific accomplishments cited:
- Inflation was brought down to low single digits.
- Commitment to the EU Stability and Growth Pact helped lower the fiscal deficit relative to GDP and limit government debt.
- Strong financial oversight bolstered the resilience of the financial system.
- During the global crisis:
- Strong policy frameworks allowed countercyclical monetary and fiscal policies while preserving financial sector stability.
- The FCL arrangement supported investor confidence.
- Poland was the only EU economy to avoid a recession in 2009, and the government maintained access to international capital markets on favorable terms.
- 2010 developments and outlook:
- The economy gathered momentum in 2010, underpinned by low interest rates, a neutral fiscal stance, improving external demand, and rising confidence.
- Economic growth is projected to remain solid and balanced.
- Authorities are committed to keep implementing economic policies that preserve macroeconomic stability.
- Risks and justification for the FCL successor arrangement:
- Sizeable downside risks remain, particularly from the possibility of further spillovers of financial turbulence in other parts of Europe.
- The augmented duration and size of the successor FCL will allow the FCL to play a stronger role in insuring Poland against external risks while supporting the authorities’ overall macroeconomic strategy.
Flexible Credit Line (FCL): purpose, features, and reforms
- FCL established on March 24, 2009 for countries with very strong fundamentals, policies, and track records of policy implementation; particularly useful for crisis prevention purposes.
- FCL arrangements are approved for countries meeting pre-set qualification criteria (see Press Release No. 09/85).
- Reforms approved August 30, 2010 (Press Release No. 10/321) enhanced the FCL:
- Duration of the line expanded from one year to up to two years (with an interim review of continued qualification after one year).
- Removal of the implicit cap on access to resources of 1000 percent of a country’s IMF quota.
- The repayment period on any drawings is between three and a quarter and five years.
- Access is determined on a case-by-case basis, and is fully available from the start, rather than being phased over time as in traditional IMF arrangements.
- Disbursements under the FCL are not conditioned on implementation of specific policy targets or meeting quantitative criteria.
- There is flexibility to either draw on the credit line at the time it is approved, or treat it as precautionary.
Qualification criteria for FCL arrangements
- Core purpose: highlight the IMF’s confidence in a qualifying member country’s policies and its ability to take corrective economic policy measures when needed.
- Central assessment: member country has very strong economic fundamentals and institutional policy frameworks; is implementing—and has a sustained track record of implementing—very strong policies; and remains committed to maintaining such policies in the future.
- Specific criteria used to assess qualification:
- A sustainable external position.
- A capital account position dominated by private flows.
- A track record of access to international capital markets at favorable terms.
- A reserve position that is relatively comfortable when the FCL is requested on a precautionary basis.
- Sound public finances, including a sustainable public debt position.
- Low and stable inflation, in the context of a sound monetary and exchange rate policy framework.
- No bank solvency problems that pose systemic threats to banking system stability.
- Effective financial sector supervision.
- Data integrity and transparency.
Source: Press Release No. 11/15, January 21, 2011 — International Monetary Fund.