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| ARTICLE V, SECTION 2(b) | ||||
| Technical and Financial Services | ||||
| Technical Services | ||||
| Policy Support and Policy Coordination Instruments | ||||
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The Acting Chair’s Summing Up—Review of the Policy Coordination Instrument and Proposal to Eliminate the Policy Support Instrument, Executive Board Meeting 23/77, October 4, 2023 Executive Directors welcomed the review of the Fund’s experience with the Policy Coordination Instrument (PCI) since its establishment in 2017, as well as the proposal to eliminate the Policy Support Instrument (PSI). They noted that the PCI is an important part of the Fund’s non-financing instruments, which has helped countries signal strong policy commitment to a reform agenda and unlock financing from official and private creditors. Directors agreed that the PCI has served the membership well and broadly met the goals and expectations set out at its establishment. They also concurred that the strong policy commitment and the flexibility provided under the PCI have played an important role in facilitating access to Fund financing when needed. To ensure that it remains fit for purpose in today’s complex global environment, Directors endorsed proposals to enhance the PCI’s operational flexibility and clarity, while safeguarding its signaling of strong policy commitment. Directors supported the proposals to enhance the flexibility of the PCI review schedule, while maintaining regular and uninterrupted signals. To reduce the risk of sending a premature off-track signal, they agreed to extend the PCI automatic termination period, based on the review frequency. This will ensure that countries can always make use of the three-month buffer before the automatic termination of the PCI. Directors also agreed to allow, in exceptional circumstances, an additional 30 days (“grace period”) beyond the regular buffer period for the completion of a review under a PCI that is on-track and where the PCI user is transitioning to a Fund arrangement. This adjustment would ensure a smoother transition, reduce administrative burdens, and have limited impact on the signaling value of the PCI. To mitigate any potential complication with the scheduled PCI review dates, Directors welcomed guidance to encourage sufficient time between the fixed review date and the next test date. Directors saw scope for improving the modalities for concurrent use of the PCI with SBA and/or SCF arrangements. They supported the requirement to demonstrate in staff reports the relevance of retaining the PCI at approval of an SBA and/or SCF arrangement and, if the arrangement exceeds 12 months in length, at subsequent reviews. Directors also supported the clarification that the duration of an SBA and/or SCF arrangement used concurrently with a PCI can extend beyond the end date of the existing PCI and will depend on the length of financing and adjustment needs. Directors agreed to examine, at the time of the interim review of the RST expected in April 2024, issues regarding concurrent use of the PCI with the RSF. This would allow for a holistic consideration of issues, which cut across many Fund instruments. Such issues include the appropriateness of existing safeguards to ensure that a country requesting an RSF arrangement with a concurrent PCI does not have a BoP gap, and issues of termination of RSF financing when a country transitions from a PCI to a Fund arrangement. Notwithstanding the very positive experience among PCI users, Directors noted limited awareness of the PCI’s benefits by non- users, which may inhibit its take-up and its catalytic role. In this context, they called for an external outreach to communicate these benefits to country authorities, creditors, and the public. In addition, noting that coordination with Regional Financing Arrangements (RFAs) in the context of Fund policy support under a PCI remains untested, Directors recommended closely engaging with RFAs. Given the lack of demand for the PSI and the universal switch of PSI users to the PCI, Directors endorsed the proposal to eliminate the PSI. While programs supported by the Fund under both instruments meet UCT-quality standards, Directors noted the strong preference of past PSI users for the PCI, given its greater flexibility, universal applicability, and the perception that it is an upgrade relative to the PSI. As such, Directors stressed the importance of clearly communicating that the elimination of the PSI is not expected to have any negative impact on PRGT-eligible countries. More generally, Directors reiterated the importance of maintaining a streamlined and coherent toolkit. SU/23/142 October 5, 2023 | ||||
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