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

Policy Papers, October 21, 2024

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

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Bibliographic details

• Published: October 21, 2024
• Series: Policy Papers
• DOI: https://doi.org/10.5089/9798400291913.007

Overview and Objectives

• Reviews Poverty Reduction and Growth Trust (PRGT) facilities and financing.
• Proposes a comprehensive package of lending policy reforms and financing measures to:
  • Bolster the Fund’s capacity to support Low-Income Countries (LICs) in addressing their balance of payment needs.
  • Restore the self-sustainability of the Trust.

Proposed Long-Term Lending Envelope

• Proposes a long-term self-sustained annual PRGT lending envelope of SDR 2.7 billion.
• Notes this is more than double the PRGT envelope before the Covid-19 pandemic.
• Rationale: consistent with the expected demand for Fund’s concessional financial support in the years ahead.

Interest Rate Mechanism and Targeting Concessionality

• Proposes introduction of a new interest rate mechanism to better reflect the heterogeneity among LICs and focus further concessional resources to the poorest countries.
• Key elements:
  • The poorest countries (currently 31 LICs) will continue to benefit from interest-free lending under the PRGT.
  • Other LICs will be charged a modest, and still concessional, interest rate.

Access Limits and Program Design Changes

• Proposes to keep PRGT access limits at their current levels.
• Additional proposed reforms include:
  • 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.
  • Implementing a targeted adjustment to the Policy Safeguards for High Combined Credit Exposure.

Financing Measures to Close Subsidy Gap

• Proposes measures to address the remaining gap in PRGT subsidy resources after accounting for the lending policy changes:
  • (1) A further five-year suspension of PRGT administrative expenses reimbursement to the GRA.
  • (2) A framework to deploy IMF internal resources to facilitate the generation of PRGT subsidy resources.

Subject Areas and Keywords (as listed)

• Subjects: Currencies, Financial institutions, Income, Loans, Money, National accounts, Poverty, Poverty reduction and development, Poverty reduction strategy.
• Keywords include: Access limits, concessional, concessional financing, COVID-19 pandemic, E. PRGT contribution assurance, economic heterogeneity, Global, GRA distribution, GRA resource distribution framework, Income, investment strategy, IPAA instrument, LICs, Loans, low-income countries, macroeconomic stability, Poverty reduction and development, Poverty Reduction and Growth Trust, Poverty reduction strategy, PRGT, PRGT eligibility, PRGT eligibility framework, PRGT financing, PRGT safeguards, PRGT self-sustainability, PRGT subsidy, self-sustainability, shock-prone world, World Bank.

International Monetary Fund. Policy Papers 2024, 047 (2024).

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