IMF Executive Board Approves Policy Safeguards for High Levels of Combined Access to Resources from the General Resources Account and the Poverty Reduction and Growth Trust HTML File

IMF Executive Board Approves Policy Safeguards for High Levels of Combined Access to Resources from the General Resources Account and the Poverty Reduction and Growth Trust

September 18, 2020

Washington, DC: The Executive Board of the International Monetary Fund (IMF) approved on September 9 policy safeguards to apply when financing requests entail high levels of combined access to resources from the General Resources Account (GRA) and the Poverty Reduction and Growth Trust (PRGT). This should help ensure a more coherent application of policy safeguards in Fund lending across the membership.

The IMF applies heightened scrutiny to requests from member countries for very high levels of access to Fund resources, 'exceptional access.' The criteria by which these requests for exceptional access to the Fund's general resources account (GRA) are assessed were established in 2002 and have been reviewed and adjusted over time, most recently in 2016. A related but distinct framework applicable to requests for exceptional access to the Fund's concessional resources, provided through the Poverty Reduction and Growth Trust (PRGT), was introduced in 2009.

The respective policies governing exceptional access to the GRA and the PRGT operate independently of each other.The independent operation of the two exceptional access frameworks means that PRGT-eligible countries can request access to a mix of resources from the GRA and PRGT at levels that, on a combined basis, exceed the levels that constitute exceptional access in the GRA and the PRGT, yet do not constitute exceptional access under either the GRA or the PRGT. [1] Such requests, though large in scale, would not be subject to the scrutiny of either of the exceptional access frameworks.

The policy safeguards will apply when requests for financing entail levels of combined access to GRA and PRGT resources in excess of specified thresholds. These thresholds are set at the same levels that trigger application of the GRA exceptional access framework. The safeguards are also broadly aligned with the criteria and procedures applied in the GRA exceptional access framework.

Executive Board Assessment [2]

Executive Directors welcomed the opportunity to discuss new policy safeguards to mitigate financial risks to the PRGT and to the GRA, respectively, that arise from a member having high combined credit from these two sources of financing. They generally agreed on the need for appropriate scrutiny for such cases, and on ensuring a more consistent application of policy safeguards in Fund lending.

Directors broadly supported the proposed policy safeguards, which would apply to any Fund member with combined access to GRA and PRGT resources that exceeds quota‑based thresholds set at the same level that triggers the exceptional access framework of the GRA, and agreed that the assessment of the three criteria will apply at the time of approval of financing requests as specified in the proposed decision and at reviews in the context of arrangements. They agreed that, by introducing new policy safeguards requiring more scrutiny on requests for high combined access levels not currently covered by the Fund's exceptional access frameworks, the new policy would help to mitigate financial risks to the PRGT and GRA, respectively.

Some Directors highlighted that the Fund should be cautious about lending exceptionally large amounts, in particular, when debt is already at high risk of distress, and particularly without debt restructuring and/or debt relief in place to restore debt sustainability. Many Directors underscored the importance of ensuring that the Fund can adequately support PRGT‑eligible members, including through the use of blended concessional and non‑concessional financing, and particularly during these exceptional times.

A number of Directors noted that combined high access requests - like exceptional access - are expected to be exceptional, emphasizing the catalytic role of the Fund. They also underscored that, given the financial benefits, staff should continue to advise PRGT‑eligible countries to use concessional financing under the 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 Directors emphasized the need for careful communication, which highlights that the new safeguards are not intended to constrain access to Fund resources.

[1] When the PRGT exceptional access framework was introduced in 2009, the independent operation of the two frameworks was not of operational significance: PRGT-eligible countries obtained financing primarily from the (concessional) PRGT facilities while other member countries obtained financing from the GRA. This pattern has changed over time, with more PRGT-eligible countries obtaining a mix of financing from the PRGT and the GRA.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .

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