Policy Papers

2024 Review Of The Poverty Reduction And Growth Trust Facilities And Financing — Reform Proposals

October 21, 2024

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International Monetary Fund. Strategy, Policy, & Review Department "2024 Review Of The Poverty Reduction And Growth Trust Facilities And Financing — Reform Proposals", Policy Papers 2024, 047 (2024), accessed December 3, 2024, https://doi.org/10.5089/9798400291913.007

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Summary

This paper reviews Poverty Reduction and Growth Trust (PRGT) facilities and financing. It proposes a comprehensive package of lending policy reforms and financing measures that aims to bolster the Fund’s capacity to support Low-Income Countries (LICs) in addressing their balance of payment needs, while restoring the self-sustainability of the Trust. The Review proposes a long-term self-sustained annual PRGT lending envelope of SDR 2.7 billion, more than double the PRGT envelope before the Covid-19 pandemic, consistent with the expected demand for Fund’s concessional financial support in the years ahead. The paper also proposes to introduce a new interest rate mechanism to better reflect the heterogeneity among LICs and focus further concessional resources to the poorest countries. These countries (currently 31 LICs) will continue to benefit from an interest-free lending under the PRGT, while other LICs will be charged a modest, and still concessional, interest rate. Additionally, the paper proposes to keep PRGT access limits at their current levels and to implement several reforms, including: reverting the PRGT access norm to the level prevailing before December 2023, streamlining and strengthening the PRGT safeguards, adjusting the PRGT eligibility and graduation framework and updating the list of PRGT-eligible countries, extending the temporarily higher cumulative access limits under the RCF until the end of December 2025, and implementing a targeted adjustment to the Policy Safeguards for High Combined Credit Exposure. On financing measures, the paper proposes to address the remaining gap in PRGT subsidy resources after accounting for the lending policy changes through (1) a further five-year suspension of PRGT administrative expenses reimbursement to the GRA and (2) a framework to deploy IMF internal resources to facilitate the generation of PRGT subsidy resources.

Subject: Balance of payments, Balance of payments need, Credit, Debt sustainability, External debt, Financial institutions, Financial markets, Financial services, Income, International capital markets, Loans, Money, National accounts, Poverty, Poverty reduction strategy, Public debt, SDR interest rate

Keywords: Access limits, Balance of payments need, Concessional, Concessional financing, COVID-19 pandemic, Credit, Debt sustainability, Economic heterogeneity, Global, Income, International capital markets, LICs, Loans, Low-income countries, Macroeconomic stability, Poverty Reduction and Growth Trust, Poverty reduction strategy, PRGT, PRGT eligibility, PRGT safeguards, SDR interest rate, Self-sustainability, Shock-prone world, World Bank

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