Front Matter Page

ELIGIBILITY TO USE THE FUND’S FACILITIES FOR CONCESSIONAL FINANCING

March 15, 2013

Executive Summary

Staff has conducted a comprehensive review of the Poverty Reduction and Growth Trust (PRGT)-eligibility framework and related list. Executive Directors expressed a number of concerns about the framework during the 2012 Review of PRGT Eligibility. In light of these concerns, the Board decided to bring the next review forward by one year.

The paper concludes that there is not a strong case for making major changes to the design of the eligibility framework. Specific proposals include:

• Special provisions for very small states (microstates) in the PRGT-eligibility framework, on the grounds that these states face special challenges (as analytical work on small states suggests). Higher income thresholds for PRGT entry and for graduation could be set for these states.

• Maintenance of the ‘absence of serious short-term vulnerabilities’ criterion in its current form, to preserve a degree of flexibility and room for case-by-case evaluation in determining readiness for graduation from the PRGT.

• A few refinements to the market access criterion, including differentiation between the entry and the graduation thresholds, to build further safeguards against the risks of ‘reverse graduation’ (re-entry of recently graduated members).

Based on the application of the revised PRGT-eligibility framework, three countries are proposed for entry and two for graduation:

• Tuvalu, Marshall Islands, and Micronesia would be added to the PRGT-eligibility list if the proposed new entry criteria for microstates are approved;

• Armenia and Georgia are proposed for graduation on the basis of the income criterion; these countries‘ short-term vulnerabilities appear manageable.

• Grenada and Maldives meet the income criterion for graduation, and Vietnam and Ghana meet the market access graduation criterion; however, the staff proposes maintaining these countries‘ PRGT eligibility at this time, based on their serious short-term vulnerabilities.

Approved By

Siddharth Tiwari, Sean Hagan, and Andrew Tweedie

Contents

• INTRODUCTION AND OVERVIEW

• THE CURRENT FRAMEWORK

• THE SPECIAL PROVISIONS FOR SMALL STATES

• THE ‘VULNERABILITIES’ CRITERION

• MARKET ACCESS

• IMPLICATIONS FOR THE PRGT-ELIGIBILITY LIST

• POLICIES FOR PHASING IN CHANGES IN ELIGIBILITY

• FINANCING IMPLICATIONS

• Boxes

• 1. Criteria for Entry and Graduation from PRGT Eligibility

• 2. Entry and Graduation Criteria for Small States

• 3. Key Findings of Macroeconomic Issues in Small States and Implications for Fund Engagement.

• 4. Eligibility for IDA, the Small Island Exception, and the 2012 Review of IDA’s Graduation Policy

• FIGURE

• Figure. GNI Per Capita and Adjusted HDI

• Tables

• 1. PRGT-Eligible Countries: Per Capita GNI, Population, and Debt Distress

• 2. PRGT-Eligible Countries: Public and Publicly-Guaranteed (PPG) Debt, and GNI Per Capita

• 3. PRGT-Eligible Countries: Latest Sovereign Ratings

• 4. Access to PRGT Resources: Impact of New PRGT-Eligible Members and Alternative Blending Rules

• Annexes

• I. Assessments of Countries that Meet the Income or Market Access Criteria for Graduation

• II. Countries that Meet the Criteria for Entry

Glossary