Reports on the Incidence of a Longer-Term Program Engagement

Press Release: IMF Releasing Semiannual Reports on the Incidence of Longer-Term Program Engagement
March 5, 2004

Publication of List of Members with Longer-Term Program Engagements
February 25, 2004

Operational Guidance for Assessments of Countries with a Longer-Term Program Engagement
August 20, 2003

Conclusions of the Task Force on Prolonged Use of Fund Resources
February 4, 2003

Public Information Notice: IMF Concludes Discussion on Prolonged Use of Fund Resources
April 9, 2003

Operational Guidance on the New Conditionality Guidelines
May 8, 2003

Guidelines on Conditionality
September 25, 2002

Report on the Incidence of a
Longer-Term Program Engagement

Prepared by the Policy Development and Review Department

In consultation with other Departments

Approved by Mark Allen

July 7, 2004

1. During the discussion of the conclusions of the Task Force on Prolonged Use of Fund Resources (SM/03/46), the Executive Board established requirements for undertaking ex post assessments (EPAs) for members with a longer-term program engagement.1 The assessments are intended to provide an analysis of the economic problems facing the country and a critical and frank review of progress during the period of Fund-supported programs, as the basis for a forward-looking assessment that takes into account lessons learned and a strategy for future Fund engagement, including, where appropriate, an explicit "exit strategy." The Executive Board asked for a semi-annual report on the incidence of prolonged use (BUFF/03/5l), defined broadly to include all members with a longer-term program engagement. The first such report was issued on February 25, 2004 and presented information through January 2004 (SM/04/33, Revision 1). This second report provides information through June 2004.

2. The criteria for identifying members subject to the EPA requirement are described in box 1. Countries with longer-term program engagement as of end-June 2004 are shown on Table 1. In comparison with the first report, two additional countries now meet the criteria (Burundi and Ukraine), and none has dropped off the list. Table 2 shows the eleven members for which EPAs have already been discussed at the Board. Five of the 12 EPAs expected to have been submitted for Board consideration in the first half of 2004 have not yet been submitted, mainly due to delays in the completion of the Article IV discussions or program reviews.2 These delayed EPAs are expected to be discussed during the second half of 2004. Over the coming six months, ex post assessments are tentatively expected for 18 countries (Table 3).

Box. The Criteria for Ex-Post-Assessments

Members are subject to EPAs according to predefined criteria. For countries that have received access to Fund financing through the GRA or a blend of GRA and PRGF/ESAF resources, an assessment is to be undertaken when the member has spent at least seven of the past ten years in arrangements, including precautionary arrangements. A member supported by concessional resources would undergo such an assessment when it has had two or more multi-year arrangements.1 For countries that switch from one category to the other, an assessment should be undertaken if required under either of these criteria. For example, if a country has undergone two ESAF/PRGFs followed by a SBA, it should be subject to an EPA even if it has not yet spent seven of the past ten years in Fund arrangements. An EPA would be undertaken prior to any proposed new arrangement, provided that the country continues to meet these criteria.

In establishing these criteria for determining which members are subject to EPAs, the Executive Directors recognized that in some cases, longer-term financial engagement can be beneficial. In low-income countries in particular, the Directors generally accepted a longer- term role for the Fund, given the protracted nature of their balance of payments problems.2 Directors also underscored that longer-term program engagement may be beneficial in transition and emerging market countries with institution-building issues. Moreover, it was recognized that precautionary arrangements do not normally involve direct use of Fund resources, although they do provide access to those resources and put the Fund's reputation at stake; precautionary arrangements may be an effective device for facilitating the transition from sustained reliance on Fund resources. On balance, the Board decided that EPAs would be undertaken for all members with longer-term program engagement as defined above, given the desirability of reflecting on its program relations with a member country in such cases. The contents of the assessments themselves would distinguish those cases in which a longer-term engagement had been and remains beneficial from those in which it largely reflected a persistent failure to achieve program objectives.

1 For arrangements with members using GRA resources, the duration of the use of Fund resources is measured by the period of time covered by the Fund arrangement. For PRGF arrangements, all are counted even if they are cancelled prematurely.
2 See Role of the Fund in Low-Income Member Countries over the Medium Term-Issues Paper for Discussion (SM/03/257).


Table 1. Members with Longer-term Program Engagement
(As of June 30, 2004)
PRGF-eligible Member1     Non PRGF-eligible Member with at least seven years
of program engagement2

  Current arrangement
Current No Current  
        No Current
arrangement arrangement   Precautionary   Non-Precautionary         Arrangement

  Jordan    Argentina3         Bulgaria
  Peru   Macedonia, FYR4         Kazakhstan
  Ukraine   Uruguay3         Romania
Burkina Faso
Cote d'Ivoire            
Gambia, The            
Kyrgyz Republic            
Lao P. D.R.            
Sierra Leone            
Sri Lanka            

Source: Fund documents
1Countries that have had at least two ESAF/PRGF arrangements.
Countries that have had at least seven years of Fund arrangements in the last ten years.
3During the 7 years of Fund engagement, at least part of one arrangement was treated as precautionary.
Macedonia, while currently a user of GRA resources with 6 years of program engagement, qualifies as a member with a longer-term program engagement based on its two PRGF programs.
5Arrangement was agreed in principle on June 21, 2004 and expected to come into effect in early July.

Table 2. Ex-Post Assessments considered by the Board
(As of June 30, 2004)

Country Type of discussion Date Board paper

Mozambique   Article IV discussion   10-Dec-03 SM/03/375
Mali   Article IV discussion   15-Dec-03 SM/03/380
Georgia   Ex-post assessment   21-Jan-04 SM/03/407
Moldova   Article IV discussion   26-Jan-04 SM/04/03
Honduras   PRGF request   18-Feb-04 SM/04/24
Peru   Article IV discussion   23-Feb-04 SM/04/37
Chad   Article IV discussion   19-Mar-04 EBM/04/27/1
Romania   Ex-post assessment   12-Apr-04 SM/04/101
Zambia   Ex-post assessment   7-Apr-04 SM/04/97
Bulgaria   Article IV discussion   14-Jun-04 SM/04/169 
Niger   Article IV discussion   28-Jun-04 SM/04/188

Source: Fund staff

Table 3: Ex-post Assessments Tentatively Expected
for Board Discussion, July–December 2004
  Kyrgyz Republic2
  Macedonia, FYR2
  Sierra Leone

Sources: Fund staff
1EPA expected to be discussed in the context of Article IV consultations or combined Article IV/program review discussions unless otherwise indicated.
2EPA expected to be discussed in the context of final program review.

1The requirements for ex post assessments are discussed in a guidance note which was circulated to the Board for information (SM/03/233, Revision 1).
2Armenia, Benin, former Yugoslav Republic of Macedonia, Kazakhstan, and Lesotho.