Policy Papers

The 2023 Review of the Flexible Credit Line (FCL), the Short-Term Liquidity Line (SLL), and the Precautionary and Liquidity Line (PLL) introduced a welcome streamlining of procedures. This included dropping the requirement for an informal consultation with the Executive Board for the approval of successor FCL and PLL arrangements when certain requirements were met. In implementing the new procedures, however, staff observed that, inadvertently, one requirement is at odds with the well-established practice for consecutive FCL and PLL arrangements. It is normal practice to cancel an existing arrangement shortly before expiration, while simultaneously requesting a successor arrangement to ensure seamless back-to-back arrangements. But an unintended consequence of the drafting of the new procedures is that an informal consultation with the Executive Board can be waived only when an arrangement expires—not if it were to be canceled shortly before expiration to ensure seamless back-to-back arrangements—even if all the other requirements for dropping such consultation are satisfied. This unduly constrains the reform and is at odds with the intention presented in the 2023 Review. To rectify the issue, staff proposes the adoption of a decision with a targeted modification of the FCL and PLL decisions.