July 31, 2015
IMF COMMUNICATIONS DEPARTMENT |
| Media Relations |
|---|
| E-mail: media@imf.org |
| Phone: 202-623-7100 |
The Executive Board of the International Monetary Fund (IMF), on July 17, 2015, reviewed the framework for eligibility to use the Fund’s concessional resources under the Poverty Reduction and Growth Trust (PRGT) and the list of PRGT-eligible members and adopted the proposals outlined in the staff paper “Eligibility to Use the Fund’s Facilities for Concessional Financing, 2015.”
Executive Board Assessment1
Executive Directors welcomed the opportunity to review the eligibility framework and the associated list of PRGT-eligible countries, and to consider staff’s proposals for enhancing the framework. Directors concurred that PRGT-eligibility should continue to be guided by a framework that is transparent and rules-based to reserve access to Fund’s concessional financing for members with low income per capita levels and without durable and substantial access to financing in international markets. Directors agreed that the eligibility framework should ensure uniformity of treatment among members, while taking account of country-specific circumstances. Additionally, the framework should remain consistent with the self-sustainability of PRGT lending capacity over time and broadly aligned with International Development Association practices, allowing scope for some differences in graduation criteria between the Fund and the World Bank given the different mandates of the two institutions.
Directors broadly agreed with staff’s proposals to enhance the existing framework by: (i) making use of additional data sources in assessing that a country has durable and substantial market access; and (ii) limiting the application of the serious short-term vulnerabilities criterion so that it would not preclude the graduation of a country with income per capita exceeding the applicable graduation threshold by 50 percent or more. In this context, Directors generally agreed that including domestic and/or private external debt in the assessment of overall debt vulnerabilities would help align the PRGT framework with the latest debt sustainability framework.
Directors supported the graduation of Bolivia, Mongolia, Nigeria, and Vietnam from PRGT eligibility. They generally supported staff’s proposals regarding the non-graduation of other members that meet one or both of the graduation criteria but which are prevented from graduation by the presence of serious short-term vulnerabilities. Directors highlighted the need for continued monitoring of the remaining PRGT for countries facing serious short-term vulnerabilities and for the Fund to stand ready to provide concessional finance should balance-of-payments needs emerge. They underscored the need for early engagement and communication on the graduation process with the countries concerned. Directors agreed that there were no new countries that met the entry criteria. More generally, they recommended careful monitoring of graduating economies to minimize the risk of reverse graduation especially in light of the current global financial environment. A number of Directors highlighted that they would have preferred a framework that would allow for flexibility in the graduation process, including continued concessional financing in the immediate period after graduation.
Background
The framework for PRGT eligibility was established in 2010 in order to provide transparent and rules-based criteria to guide decisions on eligibility to access the Fund’s concessional facilities. It is designed to ensure the uniformity of treatment across all members with similar vulnerabilities and aligns access to concessional resources with the objectives of the PRGT. Both the framework and the associated list of PRGT-eligible countries are reviewed by the Board on a two-year cycle, with the most recent review having taken place on April 8, 2013.
The entry and graduation policies of the framework are designed to reserve access to the Fund’s concessional resources for members with low per-capita income levels and without durable and substantial access to international markets, and ensure the self-sustainability of the PRGT’s lending capacity over time. The framework comprises differentiated criteria for entry and for graduation. In broad terms, countries enter the list if their annual per-capita income is below a certain threshold and they do not have capacity to access international financial markets on a durable and substantial basis. Countries are expected to graduate from the list if they have either a persistently high level of income or capacity to access international financial markets on a durable and substantial basis, and they do not face serious short-term risks. The framework also comprises special entry and graduation criteria for small countries and microstates, on account of their particular vulnerabilities.
1 An explanation of any qualifiers used in summing up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
