Washington, DC: The IMF Executive Board completed the review of the policy on Staff-Monitored Program with Board Involvement (PMB) on February 7 and endorsed the proposal to keep the PMB in the Fund’s toolkit with a subsequent review expected in three years.
In September 2022, the Executive Board amended the policy on SMPs to create PMBs. As with all SMPs, the objective of the PMB is to build or rebuild a track record of policy implementation towards an Upper Credit Tranche (UCT)-quality Fund-supported program. The PMB is carefully circumscribed for member countries under 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 credit under emergency financing (EF) instruments at the time of a new EF request. It allows the Executive Board to opine, at the time of the PMB approval, on the robustness of the member’s policies to meet the program’s objectives and, in the context of reviews, on whether it agrees with staff that the member is on track to meet those objectives.
The purpose of this review, as envisaged at the time of the inception of the instrument, was to determine whether the PMB remains a valuable addition to the Fund’s toolkit. The PMB plays an important niche role in the toolkit supporting members in circumscribed circumstances. Since its inception, three members – Malawi, Ukraine and South Sudan – have implemented PMBs. Given the limited number of cases, further experience would be needed to draw more definitive conclusions in terms of the usefulness of the PMB vis-à-vis alternative instruments and a more parsimonious Fund toolkit. In this context, the Executive Board decided to keep the PMB in the Fund’s toolkit. The instrument will be expected to be reviewed in three years.
Executive Board Assessment[1]
Executive Directors broadly supported staff’s proposal to maintain the Staff-Monitored Program with Executive Board Involvement (PMB) in the Fund’s toolkit. They agreed that the PMB can complement the Fund’s toolkit in well-circumscribed circumstances, while noting that the limited number of cases thus far prevented drawing firm conclusions. They agreed that the Staff-Monitored Program (SMP) should continue to be the Fund’s primary instrument to build or rebuild a track record of policy implementation toward a Fund arrangement that supports an Upper Credit Tranche (UCT)-quality program.
Directors acknowledged the potential benefits of limited Executive Board involvement through the PMB, including enhancing donor coordination, catalyzing additional financial support including in low-income, fragile, and conflict-affected countries, creating an additional safeguard in cases of elevated emergency financing exposure, reflecting the Board’s views on policies at an earlier stage, and thereby facilitating the transition to UCT-quality programs. They positively noted the experiences of Ukraine and Malawi in this regard.
However, given the limited set of countries that have used the PMB, Directors emphasized that it is too soon to accurately gauge the pros and cons of PMBs, and that further experience would be needed to draw more definitive conclusions on the usefulness of the PMB vis-à-vis alternative instruments. A few Directors were skeptical about the merits of the PMB relative to the regular SMP.
Directors stressed that access to the PMB should continue to be limited to the two use criteria to prevent encroachment on the use of SMPs. Where the PMB-use criteria are met, the PMB should continue to be encouraged, but the ultimate choice between a PMB or a regular SMP should remain voluntary and continue to rest with the requesting member.
Directors reiterated the importance of mitigating potential challenges associated with the implementation of PMB policy, particularly, potentially blurring the lines between Board endorsed programs and SMPs. Directors underscored the importance of mitigating these risks by maintaining effective communication regarding the nature and purpose of the PMB, and encouraged the next review to include an assessment of risks and challenges that may emerge with more experience with the PMB. To avoid diluting the strength of the signaling effect of the Board endorsement of UCT-quality programs, it would be critical to communicate clearly that responsibility for PMBs rests with staff and management, and the Board has limited involvement and does not endorse a PMB.
Directors agreed to have the review in three years once more experience is gained, while a number of Directors were open to an earlier review if warranted.
[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm
