IMF Executive Board Approves a new Food Shock Window and an Enhanced Staff-Monitored Program with Board Involvement

IMF News, October 5, 2022

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Published: October 5, 2022

Overview

Press Release No. 22/335; dated October 5, 2022.
Executive Board approved on September 30 a new, temporary Food Shock Window (FSW) under emergency financing instruments (Rapid Credit Facility-RCF/Rapid Financing Instrument-RFI).
Executive Board amended the policy for Staff-Monitored Programs (SMPs) to allow Program Monitoring with Board involvement (PMB).

Food Shock Window (FSW) — purpose and eligibility

Purpose:
- Provide additional emergency Fund financing for member countries with urgent balance of payments (BOP) needs due to acute food insecurity, a sharp increase in food import bills, or a shock to cereal exports.
Availability and duration:
- Available for a period of a year (12-month period).
Access rules and limits:
- Access consistent with actual BOP needs and capped at 50 percent of quota.
- Access will be additional to current annual access limits under the RCF/RFI.
- Cumulative access limits under the RFI regular window and the RCF exogenous shock window, currently at 150 percent of quota, will be increased to 175 percent of quota for members borrowing through the FSW.
Conditionality and safeguards:
- Access subject to debt sustainability and adequate capacity to repay requirements.
- Members accessing the FSW expected to commit to measures ensuring transparency and accountability in spending of emergency resources, tailored to each country’s circumstances.
Coordination and resource implications:
- Directors looked forward to strengthening coordination with specialized international organizations to address food insecurity.
- FSW will raise PRGT lending in the short term—including through additional voluntary SDR channeling—and will require further subsidy resources.
- Directors emphasized urgent need for timely bilateral pledges of loan and subsidy resources under the ongoing first stage of PRGT fundraising.
Review:
- A review of the FSW is planned by the end of June 2023.

Program Monitoring with Board involvement (PMB) — scope and criteria

Purpose:
- Allow limited Executive Board involvement in selected SMPs to opine on the robustness of a member’s policies to meet program objectives and to monitor implementation, including policies aiming to facilitate the transition to an upper credit tranche (UCT) quality IMF-supported program.
Eligibility criteria for PMB:
- Available only to members who:

1. seek to build or rebuild a track record for a Fund arrangement that supports a UCT-quality program, and 2. would benefit from limited Executive Board involvement because of either:

(i) an ongoing concerted international effort by creditors or donors to provide substantial new financing or debt relief in support of the member’s policy program, or
(ii) significant outstanding Fund credit under emergency financing instruments at the time new emergency financing is received.

Nature and limits of Board involvement:
- PMB is approved by management and monitored by staff.
- The Executive Board’s role is limited to:

1. at the time of management approval, opining on the robustness of the member’s policy program to meet PMB objectives and build/rebuild a track record toward a UCT-quality program, and 2. in the context of reviews, indicating whether it agrees with staff that the member is on track to achieve these objectives.

PMB does not amount to Executive Board endorsement of a program; endorsement occurs only if the program meets UCT-quality standard.

Voluntary nature:
- PMB will be strongly encouraged for eligible members but remains voluntary and is characterized as a form of technical assistance.
Review:
- The PMB policy will be reviewed no later than end-September 2023.

Executive Directors’ assessment and guidance (key points)

General endorsement:
- Directors broadly endorsed both the FSW and the PMB proposals.
Assessment of the global context:
- Recognized that a combination of climate shocks, the pandemic, and Russia’s invasion of Ukraine has disrupted food production and distribution, raised food and fertilizer prices, and exacerbated shortages.
Role of UCT-quality programs:
- First-best option to address BOP pressures is generally a UCT-quality program, but this may not be feasible or necessary in some cases.
- Members encouraged to transition to UCT-quality programs as soon as appropriate and feasible.
Qualification and scope concerns:
- Directors broadly supported qualification criteria for FSW but some Directors considered that other spillovers from the war might have warranted extending the criteria.
Support measures for countries unable to meet requirements:
- Directors encouraged staff to work with countries to address challenges meeting debt sustainability and capacity to repay requirements.
PRGT resource implications:
- Directors noted short-term increase in PRGT lending and need for subsidy resources; looked forward to the Annual Review of the Adequacy of PRGT Resources scheduled for Spring 2023 to consider contingency measures and possible steps to accelerate or expand fundraising.
Use of FSW alongside other arrangements:
- Concurrent use of the FSW with an SMP or, in certain cases, with a PMB could be considered to build or rebuild a track record towards a Fund arrangement that supports a UCT-quality program.
Communication:
- Directors emphasized clear communication to convey the limited nature of Executive Board involvement under PMB.

Timelines and next steps

IMF Executive Board approval date: September 30 (approved on September 30).
Public press release date: October 5, 2022.
FSW review: end of June 2023.
PMB policy review: no later than end-September 2023.
Annual Review of the Adequacy of PRGT Resources: scheduled for Spring 2023.

Source: IMF press release "IMF Executive Board Approves a new Food Shock Window and an Enhanced Staff-Monitored Program with Board Involvement", Press Release No. 22/335.