November 29, 2016
PRESS OFFICER:
Phone: +1 202 623-7100Email: MEDIA@IMF.org
On November 16, 2016, the Executive Board of the International Monetary Fund (IMF) discussed a staff paper on “ Financing for Development: Enhancing the Financial Safety Net for Developing Countries – Further Considerations”, which identifies areas where current guidance on Fund policies needs to be clarified in regard to the access of developing countries to financial support from the Fund.
The staff paper examines a number of issues raised by Executive Directors and by the
International Monetary and Financial Committee (IMFC) since the issuance to the
Board in June 2015 of a staff paper on “Financing for Development: Enhancing the Financial Safety Net for Developing Countries.” That paper had proposed a number of measures to expand access to Fund resources for developing countries, including a 50 percent increase in access limits to Fund concessional resources for those members deemed eligible to access the facilities supported by the Fund’s Poverty Reduction and Growth Trust (PRGT) – a proposal that was endorsed by the Board on July 1, 2015.
The new paper provides clarification on a number of issues pertaining to access to Fund resources for PRGT-eligible members. The issues examined include: a) access of PRGT-eligible members to Fund instruments that draw on the General Resources Account (GRA); b) the role of access norms in providing indicative guidance on what could constitute the appropriate level of access; c) the adequacy of PRGT-eligible members’ access to precautionary financial support; and d) the adequacy of safeguards to prevent repeated use of the Rapid Credit Facility (RCF) as a substitute for arrangements with ex post conditionality.
The paper does not propose specific reforms to the Fund’s concessional facilities at this juncture. A comprehensive review of PRGT resources and facilities is planned for 2018.
Executive Board Assessment [1]
Executive Directors welcomed the opportunity to discuss the Fund’s policies and practices in regard to the access of PRGT‑eligible members to the Fund’s concessional and GRA resources, as called for by the International Monetary and Financial Committee (IMFC) at its Spring 2016 meeting. Directors agreed that the current concessional financing toolkit is generally well calibrated, and appreciated clarification of existing policies and the revisions underway to the Low‑Income Countries Handbook.
Directors reaffirmed that a PRGT‑eligible member has the right to access GRA resources on the same conditions as any other Fund member. They also noted that, given the financial benefits to the member from borrowing on concessional terms, staff should continue to advise PRGT‑eligible members considering Fund financial support to seek support from the PRGT up to the applicable limits before seeking GRA resources.
Directors welcomed the clarification of the current policy on blending. They agreed that the presumption of blending PRGT with GRA resources should continue to be applied to PRGT‑eligible members meeting the income or market access thresholds for blending; these countries would have access to PRGT resources only in conjunction with access to GRA resources. Directors also agreed that this presumption does not normally apply where the member is in debt distress or at high risk of debt distress.
Directors noted that PRGT‑eligible members that are not presumed to blend can access PRGT resources exclusively up to the applicable PRGT access limits. They also noted that these members, to the extent that they meet the applicable policies on access to GRA resources, are not precluded from accessing these resources, either on a standalone basis or in conjunction with PRGT resources.
Directors reaffirmed that access to GRA resources is subject to the general policies governing GRA access and that total access to Fund resources (the sum of GRA and PRGT resources made available) should be determined case by case on the basis of the standard criteria, including balance of payments need, program strength, and capacity to repay the Fund, informed by debt sustainability analysis. Many Directors encouraged the staff to be more open to considering requests for higher levels of access to Fund resources as allowed within the current access rules, while safeguarding the Fund’s resources. Some Directors noted that this was of particular relevance in the current juncture, where a number of low‑income and frontier market economies had sizeable financing needs that could well exceed the applicable PRGT limits.
Directors underscored that access norms, as used in PRGT facilities, are neither a ceiling nor a floor on the level of access provided in PRGT‑supported arrangements. Norms should help to inform the assessment of access levels but should not be misconstrued as access limits or entitlements.
Directors agreed that the record of usage of the Rapid Credit Facility (RCF) suggests that the existing safeguards are adequate to prevent repeated use of the RCF as a substitute for arrangements with ex post conditionality and called for continued monitoring in this regard. For countries receiving support under the RCF that are also seeking to build a track record toward an upper credit tranche (UCT)‑quality program, Directors agreed that the use of a staff‑monitored program (SMP) to build such a track record would normally be the preferred option, while noting an assessment of the policy commitments made in the context of disbursements under the RCF could also be used for that purpose. Hence, a number of Directors underscored that use of an SMP to build a track record in such circumstances, while preferable, should not be required, providing flexibility to accommodate individual country circumstances.
Directors were of the view that the existing array of Fund facilities provided substantial room to provide PRGT‑eligible members with Fund support on a precautionary basis. Most Directors did not see a need to establish new facilities in the PRGT targeted specifically at providing precautionary support to PRGT‑eligible members at this juncture.
Directors emphasized the importance of continued attention to maintaining the adequacy and flexibility of the PRGT lending toolkit, including by reviewing access norms and limits, blending policy, interest rate structure, and safeguarding mechanisms for maintaining the self‑sustaining capacity of the PRGT. In this regard, they looked forward to the planned comprehensive review of PRGT resources and facilities in 2018, in accordance with the normal five‑year cycle for such reviews, as well as the upcoming meeting on the Fund’s role in assisting small states build resilience to natural disasters and climate change.
[1] An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
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