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International Monetary Fund. Strategy, Policy, &, Review Department, and International Monetary Fund. Finance Dept.
The Fund is adapting its framework for providing support to low-income countries (LICs) amid rising vulnerabilities. Despite a global economic upswing, many LICs continue to face difficult fiscal and external positions, aggravated by increasing debt levels and natural disasters in many countries. In this context, the Executive Board approved in May 2017 higher annual access limits under the Rapid Credit Facility (RCF) for balance of payment needs arising from large natural disasters and in May 2017 decided to keep the list of Poverty Reduction and Growth Trust (PRGT)-eligible countries unchanged notwithstanding rising per capita income levels. A comprehensive review of PRGT facilities is underway to consider potential adaptations of program modalities and access policies. PRGT demand in 2017 was above the historical average for the third year in a row. New commitments totaled SDR 1.7 billion, the highest level since the global financial crisis. Demand is expected to moderate somewhat in 2018. Longer-term demand estimates are broadly unchanged from last year’s update, and remain generally consistent with the self-sustaining PRGT financing framework adopted in 2012. Loan resources have been successfully replenished, while subsidy contributions remain somewhat below pledged amounts. The 2015 fundraising round mobilized slightly more than the initial target of SDR 11 billion in new loan resources from 15 PRGT lenders, which should provide adequate loan resources into the next decade. By contrast, progress has been limited in collecting the remaining pledged resources for subsidizing the interest on PRGT credit. The PRGT self-sustained capacity remains intact. The PRGT’s self-sustained long term average annual lending capacity is estimated at SDR 1.31 billion, broadly unchanged from last year’ estimate. While capacity estimates are sensitive to a variety of factors, they remain relatively close to the target of SDR 1¼ billion under a number of shocks. The Catastrophe Containment and Relief Trust (CCR Trust) remains underfunded. Funding is below the original targeted amount of new bilateral contributions totaling US$150 million, and the gap is more sizeable when considering the increase of members’ quotas under the 14th General Review of Quotas. To meet funding needs for future qualifying catastrophe relief, it is important that countries with outstanding pledges fulfill their commitments and for additional countries to come forward. Additional financing would be required to provide debt relief to members with protracted arrears. Debt relief under the Heavily Indebted Poor Counties (HIPC) Initiative is winding up, with only two potentially eligible countries left with outstanding Fund credit. These are the protracted arrears cases of Somalia and Sudan. Additional resources would be required to finance the Fund’s participation in debt relief when these countries are ready to undertake the HIPC Initiative process
International Monetary Fund

in the case of PRGT credit). Ninety percent of the new financing was provided via Fund arrangements, with the remainder coming from emergency financing via the RCF (four requests, one also involving financing from the RFI) during these three years. 8 10. The onset of the COVID-19 pandemic saw LIC demand for Fund financial support grow dramatically, with the bulk of new financing being provided via the EF instruments ( Figure 1 ) : lending to LICs during March–December 2020 amounted to SDR 9.1 billion (SDR 6.56 billion from the PRGT), of which almost 90 percent

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.

183.33 percent of quota annual (until April 6, 2021, after which it reverts to 133.33 percent of quota), and 400 percent of quota cumulative, net of scheduled repayments. 4. Staff sees a need to develop a new policy that requires careful scrutiny for cases where large combined GRA and PRGT credit exposures exceed a set threshold . 4 The purpose would be to help mitigate financial risks to the PRGT and to the GRA that arise from a member having such high outstanding combined credit. The proposed policy builds on the current policies on safeguards to GRA and PRGT

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.

). Revised Proposed Decision The following decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board: 1. Subject to paragraphs 5 and 6 below, and with a view to enhancing safeguards for the use of resources in the General Resources Account (GRA) and the Poverty Reduction and Growth Trust (PRGT), respectively, the Fund will not approve any of the following financing requests in the GRA or under the PRGT in an amount above the High Combined GRA and PRGT Credit Thresholds defined in paragraph 2 below, unless it is

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.

approve any of the following financing requests in the GRA or under the PRGT in an amount above the High Combined GRA and PRGT Credit Thresholds defined in paragraph 2 below, unless it is satisfied that the criteria set forth in paragraph 3 below and the procedural requirements set forth in paragraph 4 below are met: (i) a new arrangement in the GRA or under the PRGT; (ii) a purchase under the Rapid Financing Instrument (RFI) or a loan under the Rapid Credit Facility (RCF); (iii) an augmentation of access under an arrangement in the GRA or under the PRGT; or

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.

PRGT up to the applicable access limits before accessing resources in the GRA. Many Directors expressed concern that application of the criterion that a member’s policy program provides a reasonably strong prospect of success could preclude members with limited institutional capacity from accessing Fund resources in amounts above the thresholds for high combined GRA and PRGT credit. They underscored the importance of giving support and attention, in particular through capacity development, to those countries facing challenges with institutional capacity. Some

International Monetary Fund
On July 1, 2016 the Executive Board adopted a decision to move to a more risk-based and focused framework for Post-Program Monitoring (PPM). The revised decision on PPM, which comes into effect on September 30, 2016, specifies absolute size and quota-based thresholds for establishing expectations as to when members would engage in PPM. Under the new framework, members would be expected to engage in PPM if their credit outstanding exceeds at least one of the applicable thresholds, unless the Managing Director considers that, in her view, the member’s circumstances are such that the process is unwarranted. Against that backdrop, this paper contains proposals to operationalize the new PPM decision.