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1、 2024 International Monetary Fund IMF POLICY PAPER 2024 REVIEW OF THE POVERTY REDUCTION AND GROWTH TRUST FACILITIES AND FINANCINGREFORM PROPOSALS IMF staff regularly produces papers proposing new IMF policies,exploring options for reform,or reviewing existing IMF policies and operations.The followin

2、g documents have been released and are included in this package:A Press Release summarizing the views of the Executive Board as expressed during itsOctober 15,2024,consideration of the staff report.The Staff Report,prepared by IMF staff and completed on September 24,2024,forthe Executive Boards cons

3、ideration on October 15,2024.An Informational Annex prepared by the IMF staff.Proposal for a Distribution Framework for GRA Resources to FacilitateGeneration of Additional PRGT SubsidiesProposed Decisions prepared by the IMF staff.The IMFs transparency policy allows for the deletion of market-sensit

4、ive information and premature disclosure of the authorities policy intentions in published staff reports and other documents.Electronic copies of IMF Policy Papers are available to the public from http:/www.imf.org/external/pp/ppindex.aspx International Monetary Fund Washington,D.C.October 2024Inter

5、national Monetary Fund.Not for RedistributionPR 24/252 The IMF Approves Policy Reforms and Funding Package to Support Low Income Countries in a Sustainable Manner FOR IMMEDIATE RELEASE The reforms approved by the IMFs Executive Board aim to bolster the Funds capacity to support Low-Income Countries(

6、LICs)in addressing their balance of payment needs,while restoring the self-sustainability of the Poverty Reduction and Growth Trust(PRGT).The approved policy reforms include:a long-term self-sustained annual lending envelope calibrated at SDR 2.7 billion(about$3.6 billion),more than twice the pre-Co

7、vid-19 average.To this end,the membership agreed on a new framework to distribute IMF General Resources to facilitate generation of SDR 5.9 billion(about$8 billion)in additional PRGT subsidy resources.The Executive Board also approved reforms to help tailor IMF support to country-specific needs,reco

8、gnizing the increasing economic heterogeneity of LICs.This includes a new interest rate mechanism that maintains interest-free lending to the poorest countries,while ensuring a sufficient degree of concessionality for others.Access policies will allow for flexibility in calibrating Fund support whil

9、e safeguards will be strengthened and streamlined.Washington,DC October 21,2024:The Executive Board of the International Monetary Fund(IMF)approved a set of reforms to the Funds concessional lending facilities and an associated funding strategy to preserve the Funds ability to provide adequate suppo

10、rt to Low-Income Countries(LICs)over the long term.These reforms are detailed in the staff paper“2024 Review of the Poverty Reduction and Growth Trust(PRGT)Facilities and FinancingReform Proposals.”The IMF significantly scaled-up support to its low-income members in response to the COVID-19 pandemic

11、 and subsequent major shocks.The annual lending commitments have risen to an average of SDR 5.5 billion since 2020,compared with about SDR 1.2 billion during the preceding decade.Outstanding PRGT credit has tripled since the pandemics onset,while funding costs at the SDR interest rate have risen sha

12、rply.As a result,the PRGT faces an acute funding shortfall,with its self-sustained lending capacity projected to decline,absent reforms,to about SDR 1 billion a year by 2027,well below expected demand.International Monetary Fund.Not for Redistribution2 The reforms approved by the IMFs Executive Boar

13、d aim at maintaining adequate financial support to LICs while restoring the self-sustainability of the PRGT.The Executive Board today endorsed a long-term annual lending envelope of SDR 2.7 billion($3.6 billion)and approved a package of policy reforms and resource mobilization to support that lendin

14、g capacity.The envelope,which is more than twice the pre-pandemic capacity,is calibrated to ensure that the Fund can use its limited concessional resources to continue providing vital balance of payment support to LICs,while supporting strong economic policies and catalyzing fresh financing from oth

15、er sources.The Review includes policy changes that reflect the increasing economic heterogeneity among LICs.A new tiered interest rate mechanism will enhance the targeting of scarce PRGT resources to the poorest LICs,which will continue to benefit from interest-free lending,while better-off LICs wil

16、l be charged a modest,and still concessional,interest rate.The access norm will be set at 145 percent of quota to help anchor the average size of future arrangements and the overall lending volume.At the same time,annual and cumulative limits for PRGT normal access will remain at 200 and 600 percent

17、 of quota,respectively.This will allow for flexibility in calibrating Funds support.Safeguards will be strengthened and streamlined to maintain a robust and efficient risk management framework,in light of high lending volumes and risks.After a successful bilateral fundraising,and in the context of a

18、 robust financial outlook for the Fund,the membership reached consensus on a framework to deploy IMF internal resources to facilitate the generation of PRGT subsidy resources.Specifically,SDR 5.9 billion(about US$8 billion),in 2025 present value terms,is expected to be generated through a framework

19、to distribute GRA net income and/or reserves over the next five years.This would come on top of additional bilateral subsidy contributions,the subsidy savings from the new interest rate mechanism,and financing from a proposed further five-year suspension of PRGT administrative expenses reimbursement

20、 to the GRA.Executive Board Assessment1 Executive Directors welcomed the opportunity to discuss the 2024 Review of the Poverty Reduction and Growth Trust(PRGT)Facilities and Financing.They emphasized that the Fund,working closely with the World Bank and other partners,has a key role in supporting 1

21、At the conclusion of the discussion,the Managing Director,as Chair of the Board,summarizes the views of Executive Directors,and this summary is transmitted to the countrys authorities.An explanation of any qualifiers used in summings up can be found here:http:/www.IMF.org/external/np/sec/misc/qualif

22、iers.htm.International Monetary Fund.Not for Redistribution3 Low-Income Countries(LICs),through policy support,capacity development,concessional financing,and catalyzing donor support.Directors recognized that the exceptionally high demand for concessional financing in recent years,amid sharply high

23、er funding costs,has put PRGT finances under intense strain.Absent reforms,the PRGT self-sustained lending capacity would decline to about SDR 1 billion a year by 2027,well below expected demand.Directors stressed the urgency of maintaining adequate financial support to LICs in the years ahead,while

24、 restoring the Trusts self-sustained lending capacity.They agreed that while lending should decline from recent highs as LICs gradually recover from successive shocks and implement domestic policy reform,demand for PRGT financing will remain significantly above pre-pandemic levels in a more shock-pr

25、one world.Directors generally endorsed a long-term self-sustained annual PRGT lending envelope of SDR 2.7 billion that would allow the Fund to continue providing adequate support to LICs while being feasible from a funding perspective.They underscored that the Funds limited concessional resources sh

26、ould support strong economic policies and catalyze fresh financing from other sources.A few Directors would have preferred a lower envelope.Directors underlined that continued attention to strong program design and reform content,including in areas such as domestic resource mobilization and debt man

27、agement,will be essential to support the success and impact of PRGT arrangements.Directors broadly supported the staffs proposal for a tiered interest rate mechanism,that would apply to all new ECF and SCF arrangements and outright disbursements under the RCF approved beginning on May 1,2025,to bett

28、er reflect the increasing economic heterogeneity among LICs.They welcomed the enhanced targeting of scarce PRGT resources on the poorest LICs,for which the interest rate would remain at zero.A few Directors would have seen merit in a small positive charge as a price signal.Higher-income LICs would b

29、e charged a positive,but still concessional,interest rate in proportion to the SDR interest rate,with a higher concessional element for more vulnerable higher-income LICs with more limited market access.Directors noted that the proposal will contribute to a larger sustainable lending capacity for th

30、e PRGT that will benefit borrowers and have limited impact on members financial position and debt sustainability.Some Directors would have preferred a greater element of concessionality for higher income LICs,while a few others would have favored maintaining zero interest rates for financing to smal

31、l developing states or for emergency financing under the RCF.A few other Directors would have preferred a two-tiered International Monetary Fund.Not for Redistribution4 mechanism based solely on income.Directors broadly supported the staffs proposal that outstanding PRGT credit and new disbursements

32、 under existing PRGT arrangements and RCF financing approved through April 30,2025,would be exempt from the application of the new interest rate mechanism.Directors supported returning the access norm applicable to ECF and SCF arrangements to 145 percent of quota,on January 1,2025,in view of LICs re

33、covery from the recent extreme shocks as well as their efforts to mobilize more domestic revenue,adjust policies,and rebuild buffers.They broadly supported maintaining the PRGT overall annual and cumulative access limits at 200 and 600 percent of quota,respectively.A few Directors would have preferr

34、ed a return to previous PRGT access limits.A few Directors stressed that PRGT access limits should be determined independently of GRA access limits.Directors supported the proposed reform for Strengthened Policy Safeguards,effective from January 1,2025,which consolidates the current High Access Proc

35、edures and Enhanced Safeguards into a strengthened and streamlined framework centered around the access norm with the aim to help mitigate risks without overburdening the Funds policy framework.Directors underscored that success of programs under the PRGT will hinge on ensuring strong design and imp

36、lementation,including with regard to the size and composition of fiscal adjustments,mobilization of domestic resources,protection of priority areas including social spending and growth-enhancing public investment,governance,and structural reforms.In this regard,Directors looked forward to the analys

37、is and recommendations of the forthcoming Review of Program Design and Conditionality.Directors stressed the need to carefully monitor the implementation of the reform package.The annual reviews of PRGT resource adequacy offer a framework to review the trends in PRGT loan demand and resources.In the

38、 event that resources fall short,or demand exceeds expectations by a substantial margin for an extended period,Directors concurred that the Executive Board could introduce a range of contingency measures in the context of an ad-hoc PRGT review.They also welcomed the proposal to have a targeted mid-t

39、erm review in three years,including to assess the early experience of PRGT borrowers with the new interest rate mechanism.Directors endorsed the proposed financing framework aimed at ensuring the PRGT has sufficient self-sustained capacity to meet demand.They endorsed the proposed five-year suspensi

40、on of PRGT administrative expenses reimbursement to the GRA.In the context of the International Monetary Fund.Not for Redistribution5 Funds historically strong financial position of the GRA,Directors also supported the proposed framework consisting of(i)a Multi-Year Distribution Plan for a cumulativ

41、e amount of SDR6.9 billion of GRA net income or reserves to be achieved through annual distribution decisions of specific amounts subject to the financial conditions of the GRA and(ii)the establishment of a new administered account,the Interim Placement Administered Account(IPAA),to which such amoun

42、ts would be transferred from the GRA and temporarily placed and administered by the Fund pursuant to the terms of the IPAA Instrument,pending sufficient assurances by members for new commitments of PRGT subsidy resources.The principal amounts would become available to members for disposition based o

43、n their quota shares once the assurances equivalent to 90 percent of the aggregate amount have been reached.The framework is designed to facilitate generation of urgently needed additional PRGT subsidies,and such framework is understood to be acceptable to all Fund members.They concurred with staffs

44、 projections that such distributions would be expected to help generate an additional SDR 5.9 billion(in 2025 present value terms)in subsidy resources,conditional on members coming forward with assurances that they will provide their share(or equivalent)of the GRA distributions to benefit the PRGT s

45、ubsidy accounts.Some Directors indicated that their authorities were not in a position to provide assurances at the current juncture.Some Directors stressed the need for contingency planning given possible uncertainties in receiving sufficient assurances from member countries regarding new PRGT subs

46、idy commitments.Many Directors emphasized that relying on GRA distributions should not be viewed as a permanent solution for subsequent PRGT pledges.Directors generally noted that the option of using limited gold sales could be revisited in the medium-to longer term.Some Directors highlighted the im

47、portance of continued bilateral contributions from high-income countries.A few Directors called for the recognition of such voluntary financial contributions in the determination of members quotas.Directors also supported the further refinement to the PRGTs investment strategy.Directors concurred th

48、at the PRGT eligibility framework remains broadly adequate and agreed with the associated list of PRGT-eligible countries.They supported the proposed refinement to the five-year period and data sources used to assess past market access,which will allow for the inclusion of more recent data where rel

49、evant.Directors concurred that this modification,which would be effective immediately,would also have immediate application for the determination of market access under the framework for presumed blending.They also supported the proposal to restore,effective immediately,the assessment of absence of

50、serious short-term vulnerabilities for all PRGT-eligible countries before taking decisions on graduation and concurred that this would help better align the PRGT eligibility framework with International Monetary Fund.Not for Redistribution6 the current more shock-prone environment and continue to li

51、mit the risks of premature graduation.Directors broadly supported proposed targeted changes,effective immediately,to other PRGT policies.Directors supported a targeted adjustment to the Policy Safeguards for High Combined Credit Exposure to align its debt sustainability criterion with that under the

52、 GRA Exceptional Access(GRA-EA)policy for LICs that meet the market access criterion under the GRA-EA policy.They noted that the Independent Evaluation Office(IEO)is currently advancing its evaluation of the EA policy,and the follow-up work to the IEO recommendations would ensure any evolution of th

53、e GRA-EA policy would be reflected in the PS-HCC,as appropriate,to maintain consistency across frameworks.Most Directors supported the extension to end-December 2025 of the current cumulative access limits of the Rapid Credit Facility(RCF).Directors also concurred with the recommendation to conduct

54、a comprehensive review of the policy on Poverty Reduction Strategies in 2025.Directors agreed with Staff-proposed automatic adjustment of access limits and other quota-based thresholds when the 16th GRQ becomes effective.Directors emphasized the importance of a sound communication strategy that high

55、lights the objective of securing a self-sustainable PRGT to support the Funds continued ability to provide concessional lending to vulnerable countries,including zero-interest loans to the poorest countries.Many Directors also underlined the importance of transparent communication about all stages o

56、f the financing mechanism,including that commitments from members to contribute their share of the distribution to the PRGT will be requested following the conclusion of this PRGT review.Finally,Directors agreed that the next general review of the Funds facilities for LICs will take place on the sta

57、ndard five-year cycle.International Monetary Fund.Not for Redistribution2024 REVIEW OF THE POVERTY REDUCTION AND GROWTH TRUST FACILITIES AND FINANCINGREFORM PROPOSALS EXECUTIVE SUMMARY The IMF significantly scaled-up support to its low-income members in response to the COVID-19 pandemic and subseque

58、nt major shocks.Concessional financing under the Poverty Reduction and Growth Trust(PRGT)reached unprecedented levels.Together with financing from other partners including the World Bank,this has provided lifelines to low-income countries(LICs)to help them meet urgent financing needs while buttressi

59、ng macroeconomic stability and avoiding more disruptive adjustment.The financing came in the context of Fund policy advice on protecting economies from the harmful effects of pandemic-related disruptions and price shocks,as well as enhanced capacity building.This exceptionally high demand for conces

60、sional financing,amid sharply higher funding costs,has put PRGT finances under intense strain.Annual lending commitments have risen to an average of SDR 5.5 billion since the onset of the pandemic,compared with about SDR 1.2 billion during the preceding decade.Outstanding PRGT credit,which is provid

61、ed at a zero percent interest rate,has tripled,while funding costs at the SDR interest rate(SDRi)have risen sharply.As a result,the PRGT faces an acute funding shortfall,with its self-sustained lending capacity projected to decline to about SDR 1 billion a year by 2027,well below expected demand.The

62、 urgent task for this Review is thus to maintain adequate financial support to LICs in the years ahead while restoring the Trusts self-sustained lending capacity.While lending should decline from recent highs as LICs gradually recover from successive shocks,staff projects that demand for PRGT financ

63、ing will remain significantly above pre-pandemic levels.Resolving the imbalance between expected demand for PRGT financing and its sustainable supply will require recalibration of current lending policies as well as additional resources.The Review proposes a long-term self-sustained annual PRGT lend

64、ing envelope of SDR 2.7 billion.While down substantially from recent levels,this envelope is still more than twice the pre-crisis average,reflecting the significant balance of payments(BoP)pressures many LICs will continue to face in a more shock-prone world.The envelope is calibrated to ensure that

65、 the Fund can use its limited concessional resources to September 24,2024 International Monetary Fund.Not for Redistributioncontinue providing vital BoP support to LICs,while supporting strong economic policies and catalyzing fresh financing from other sources.The Review introduces a number of signi

66、ficant policy changes that reflect the increasing economic heterogeneity among LICs.First,staff proposes a tiered interest rate mechanism that would enhance the targeting of scarce PRGT resources on the poorest LICs.These countries(31 out of the total 69 LICs)would continue to benefit from interest-

67、free lending,while higher-income LICs would be charged a positive,but still concessional,interest rate.Second,staff proposes that the access norm be returned to the 145 percent of quota that was effective before the temporary increase in December 2023.The lower norm would help anchor the average siz

68、e of future arrangements at a level that reflects LICs recovery from the recent extreme shocks as well as their efforts to mobilize more domestic revenue,adjust policies,and rebuild buffers.Staff proposes that the annual and cumulative limits for PRGT normal access remain at 200 and 600 percents of

69、quota.This would allow for flexibility in calibrating Fund support,as LICs will continue to face a difficult environment in the coming years and some will need to be supported by larger programs.The Review proposes to strengthen and streamline the safeguards to maintain a robust and efficient risk m

70、anagement framework.This would be achieved by consolidating the current High Access Procedures and Enhanced Safeguards into a single,coherent framework centered around the access norm with the aim to help mitigate risks without overburdening the Funds policy framework.To help close the PRGT funding

71、gap,the Review proposes a distribution of IMF internal resources,in the context of a historically strong financial position of the GRA.Taking into account additional bilateral subsidy contributions,the proposed interest rate mechanism,and a proposed further five-year suspension of PRGT administrativ

72、e expenses reimbursement to the GRA,an additional SDR 5.9 billion(in 2025 present value terms)would be generated through contributions facilitated by a distribution of GRA net income and/or reserves.The option of using limited gold sales could be revisited in the medium-to longer term,for example if

73、 demand from LICs exceeds projections.The PRGTs investment strategy would also be refined.Staff will carefully monitor the evolution of the lending capacity and the impact of the policy changes on borrowers needs and financing costs.The annual reviews of PRGT resource adequacy offer a framework to r

74、eview the trends in PRGT loan demand and resources.In the event that resources fall short,or demand exceeds expectations,the Board could introduce a range of contingency measures in the context of an ad-hoc PRGT review.Moreover,staff proposes a targeted mid-term review after 3 years,including to ass

75、ess the early experience of PRGT borrowers with the new interest rate mechanism,prior to the next comprehensive Review of PRGT Facilities and Finances on the standard 5-year cycle.Staff also proposes targeted adjustments to other PRGT policies.These cover the PRGT eligibility framework,the Policy Sa

76、feguards for High Combined Credit Exposure,the Cumulative Access Limits of the Rapid Credit Facility,and the policy on Poverty Reduction Strategies.2 INTERNATIONAL MONETARY FUND 2024 PRGTREFORM PROPOSALS International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS INTERNATIONAL MONETA

77、RY FUND 3 The proposed policy and financing package will allow the Fund to continue helping its LIC members implement sound economic policies and build stronger institutions.This critical role is grounded in the fact that the bulk of demand for concessional financing is coming from LICs implementing

78、 UCT arrangements in support of countries homegrown adjustment plans and equipped with ex post conditionality.Continued attention to strong program design and reform content,including in areas such as domestic resource mobilization and debt management,will be essential to support the success and imp

79、act of PRGT arrangements.To this end,the Fund will carefully examine best practices and reform options for underpinning successful programs in the context of the forthcoming Review of Program Design and Conditionality(RoC).International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 4

80、 INTERNATIONAL MONETARY FUND Approved By Ceyla Pazarbasioglu(SPR),Bernard Lauwers(FIN),and Rhoda Weeks-Brown(LEG)Prepared by the Strategy,Policy,and Review Department,the Finance Department,and the Legal Department.The team worked under the guidance of Guillaume Chabert(SPR),Papa NDiaye(FIN),and Ber

81、nhard Steinki(LEG).The SPR team was led by Galle Pierre supported by Bjrn Rother and Tokhir Mirzoev,and comprised Seunghwan Kim,Mamadou Barry,Andreja Lenari(Team leads),Jung Kim,Plamen Iossifov,Anja Baum,Lukas Pender Kohler,Marta Spinella,Yiqun Wu,Oana Luca,Alexei Miksjuk,Eric Pondi,Alexander Zaboro

82、vskiy,John-Paul Fanning,Jocelyn Boussard,Joo Capella-Ramos,Romina Kazandjian,Yinhao Sun,Maxwell Tuuli,Yipei Zhang,Maxwell Kushnir,Jijun Wang,Holt Williamson,and Lavinia Zhao.The FIN team was led by Dalia Hakura,Heikki Hatanpaa,Joseph Thornton,Nelson Sobrinho,and comprised David Stenzel,Phil de Imus,

83、Olivier Basdevant,Vidhya Rustaman,Mariel Acosta,Phil Johnston,Lennart Erickson,Tetsuya Konuki,Yumeng Gu,Helen Wagner,Elena Budras and Johannes Kiess.The LEG team was led by Gabriela Rosenberg,Hoang Pham,Gomiluk Otokwala,Jonathan Swanepoel,and comprised Egbiri Egbiri,Eva Kabundu,Eugenia Siracusa,Joel

84、 Lee and Kenneth Okwor.Linda Bisman,Emelie Stewart,and Katarina Varga(SPR)provided excellent administrative support.CONTENTS 2026Glossary _ 7 INTRODUCTION _ 9 TAKING STOCK:THE ROLE OF THE FUND IN LICS AND RECENT TRENDS IN PRGT LENDING _ 10A.The Funds Multifaceted Engagement with LICs _ 11B.The Funds

85、 Lending to LICs:Role and Recent Trends _ 12THE PRGT LENDING ENVELOPE _ A.Borrower Demand:Some Normalization but Higher Than During 2010s _ 20B.Calibrating a Self-Sustained PRGT Envelope Meeting Members Needs _ 22LENDING POLICY CHANGES _ A.Introducing a Differentiated PRGT Interest Rate Structure _

86、26B.Recalibrating the Access Norm and Maintaining the PRGT Access Limits at their Current Levels _ 37C.Strengthening and Streamlining PRGT Safeguards _ 39International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS INTERNATIONAL MONETARY FUND 5 D.Ensuring Timely Operationalization of

87、the Policy Changes and Adequate Monitoring of their Impact _ 42 43 4345 47 50 56 59 222427 28 32 58 151617 18 1924 34 48 30 32FINANCING PROPOSALS _A.Proposed Financing Sources for Addressing PRGT Subsidy Needs _B.Loan Resources _C.Proposed Refinements to the PRGT Investment Strategy _OTHER TARGETED

88、REFORMS _A.Fine-Tuning the PRGT Eligibility Framework _ 50 B.Adjusting the PS-HCC _ 52 C.Extending Temporarily the Current Cumulative Access Limits for the RCF _ 53 D.Promoting the Precautionary Use of the SCF _ 54 E.Streamlining the Requirements on Poverty Reduction Strategies _ 55 ENTERPRISE RISK

89、ANALYSIS _ISSUES FOR DISCUSSION _BOXES 1.Income Heterogeneity of PRGT-Eligible Countries _2.PRGT Demand Estimates and Central Policy Scenario _3.Criteria for Presumed Blending _4.Stability of Country Tiers _5.Comparison of Macroeconomic Vulnerabilities Across Country Tiers _6.Mitigating Measures for

90、 Insufficient PRGT Resources _FIGURES 1.The Scale of Fund Lending Relative to Total External Financing to LICs _2.Disbursements and Commitments to PRGT-Eligible Countries _3.Use of PRGT Facilities by Group of Countries,2010-24 _4.Median IMF Financing Share,2005-23 _5.Simulation of PRGT Assets in the

91、 Reserve Account and Subsidy Accounts(2020-35)_6.Future PRGT Lending Envelope _7.Select Global and IMF Interest Rates under Staffs Proposal _8.Current and Proposed Asset Allocation for the Long-Term Investment Strategy _TABLES 1.Country Groupings Under Staffs Proposal _2.Criteria for Country Groupin

92、gs,PRGT Access,and PRGT Interest Rates _International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 6 INTERNATIONAL MONETARY FUND 3.Impact of the Interest Rate Mechanism on Grant Elements _ 36 41 44 46 61 63 65 71 77 80 86934.Proposed Changes in the Safeguards Framework _5.PRGT:Finan

93、cing Needs and Possible Sources _6.PRGT:Loan Resources _ANNEXES I.The Historical Evolution of the Funds Concessional Lending _II.IMF and WB Collaboration _III.Estimating Demand for PRGT Financing _IV.The Role of Access Norms History and Economic Implications _V.Blending Policy _VI.Interest Rates Und

94、er the PRGT:Evolution Over Time and Staff Proposal _VII.Financial Impact of the New Interest Rate Mechanism on PRGT Countries _VIII.Strengthening and Streamlining PRGT Safeguards _IX.2024 Review of Eligibility to Use the Funds Facilities for Concessional Financing _ 101X.Fine-Tuning the Policy Safeg

95、uards for High Combined Credit Exposure(PS-HCC)_ 117XI.RCF Cumulative Access Limits _ 120XII.Reflections on the Use of the Stand-by Credit Facility _ 123XIII.Current and Proposed Access Limits,Norms,Safeguard and Market Access Thresholds _ 127International Monetary Fund.Not for Redistribution2024 PR

96、GT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 7 Glossary BPS Basis Points BoP Balance of Payments CCRT Catastrophe Containment and Relief Trust CD Capacity Development DIA Deposit and Investment Account DSF Debt Sustainability Framework EA Exceptional Access ECF Extended Credit Facility EF E

97、mergency Financing EFF Extended Fund Facility ES Enhanced Safeguards FCS Fragile and Conflict-Affected States FSSA Financial Sector Stability Assessments FSW Food Shock Window GFC Global Financial Crisis GFN Gross Financing Needs GNI Gross National Income GRA General Resources Account GRQ General Re

98、view of Quotas GSA General Subsidy Account HAP High Access Procedures HIPC IBRD Heavily Indebted Poor Countries International Bank for Reconstruction and Development IDA IDS IEO International Development Association International Debt Statistics Independent Evaluation Office IFIs International Finan

99、cial Institutions IMF International Monetary Fund LA Loan Account LICs Low-Income Countries MDRI Multilateral Debt Relief Initiative MONA Monitoring of Fund Arrangements Database NIM New Income Model NPA Note Purchase Agreement PV Present Value ODA Official Development Assistance PB Precautionary Ba

100、lances PCI Policy Coordination Instrument PCS Preferred Creditor Status International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 8 INTERNATIONAL MONETARY FUND PFM Public Financial Management PRS Poverty Reduction Strategy PRGT Poverty Reduction and Growth Trust PS-HCC RA Policy Sa

101、feguards for High Combined Credit Exposure Reserve Account RCF Rapid Credit Facility RFI Rapid Financing Instrument RoC Review of Program Design and Conditionality SA Subsidy Account SBA Stand-by Arrangement SCF Stand-by Credit Facility SDA Special Disbursement Account SDGs Sustainable Development G

102、oals SDR Special Drawing Rights SDRi SDR Interest Rate SLA Special Loan Accounts SMS Small and Micro States SPS Strengthened Policy Safeguards SRA SSTV Subsidy Reserve Account Serious Short-Term Vulnerabilities TA Technical Assistance UCT Upper Credit Tranche UFR Use of Fund Resources WDI World Deve

103、lopment Indicators WEO World Economic Outlook International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 9 INTRODUCTION 1.Low-income countries(LICs)are gradually recovering from recent shocks but face persistent macroeconomic vulnerabilities.1 The

104、COVID-19 pandemic,Russias war in Ukraine,and the parallel tightening of international financial conditions have taken a large toll on LICs.2 Growth has been recovering but remains subdued amid significant scarring from the pandemic,tight liquidity,and weak external and fiscal buffers.Strong policy e

105、fforts in combination with unprecedented financing from external partners have helped LICs mitigate the impact of the shocks,and progress is now being made with macroeconomic stabilization.Several LICs also re-accessed international financial markets since early 2024.However,the medium-term outlooki

106、ncluding for accelerating income convergence vis-vis more advanced peers and advancing toward the Sustainable Development Goals(SDGs)remains challenging and LICs are particularly exposed to shocks such as climate events,commodity price fluctuations,and political instability.This is particularly true

107、 for the poorest LICs,many of which are also Fragile and Conflict-Affected States(FCS).Achieving sustained gains with macroeconomic stability and inclusive growth will require well-calibrated domestic policies and structural reforms,as well as sustained support by the international community.The Fun

108、d has a critical role to play as part of the latter,mainly through its Poverty Reduction and Growth Trust(PRGT)that provides concessional financing to LICs.2.The urgent task for this review of PRGT Facilities and Financing is to maintain adequate financial support to LICs while restoring the Trusts

109、self-sustained lending capacity.While demand for PRGT lending is expected to fall from the unprecedented levels of recent years(an average of SDR 5.5 billion over 2020-23),staff anticipates that medium-and longer-term demand will remain significantly above pre-pandemic levels that hovered around SDR

110、 1.2 billion per year.At the same time,the high lending volumes in combination with the increase in the SDR rate(SDRi)have put PRGT finances under strain.In the absence of policy changes and additional subsidy resources,the PRGT could only sustain a lending envelope of an average SDR 1 billion per y

111、ear from 2027a level even lower than during the 2010s.Restoring the PRGTs longer-term financial viability is thus an urgent priority.3.To achieve this objective,the paper sets out a package of proposals for Executive Board consideration.Based on demand projections and in line with anticipated resour

112、ce constraints,staff proposes a PRGT long-term self-sustained lending capacity of SDR 2.7 billion per year.This envelope would need to be supported by a recalibration of PRGT lending policies and additional financing.Staff would closely monitor the evolution of the self-sustained lending capacity as

113、 well as the impact of the main policy changes on borrowers.In addition to this core area of the 1 In this paper,“LICs”and“PRGT-eligible countries”cover the same perimeter of countries and are used interchangeably(for the PRGT eligibility criteria see Annex IX).“Concessional financial support/loans”

114、are defined as those provided at a lower cost(i.e.,higher grant element)than General Resources Account(GRA)lending.2 IMF(2024).Macroeconomic Developments and Prospects for LICs2024.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 10 INTERNATIONAL MONETARY FUND Review,the p

115、aper proposes targeted reforms in other areas to enhance the Funds policy frameworks applicable to its LIC members.4.Staff proposals reflect the guidance provided by Executive Directors in a series of informal engagements.3 They also draw on a mission chief survey and suggestions from the April 2024

116、 IMF-WB Joint Event on Policy Action in LICs and the Role of the International Community.5.The rest of the paper is organized as follows.The next section sets the stage with a discussion of the distinct role of the Fund in providing balance of payment(BoP)support,and recent trends in Fund lending to

117、 LICs and implications for PRGT facilities and lending capacity.The third section presents the annual SDR 2.7 billion self-sustained PRGT lending envelope.The fourth section lays out staffs proposed lending policy changes.The fifth section outlines a proposal to mobilize resources in support of the

118、envelope and proposes refinements to the PRGTs investment strategy.The sixth section covers other targeted reforms.The paper concludes with a discussion of enterprise risks.The annexes provide technical details underpinning staffs proposals.TAKING STOCK:THE ROLE OF THE FUND IN LICS AND RECENT TRENDS

119、 IN PRGT LENDING Within its mandate and working closely with the World Bank(WB)and other partners,the Fund has a long history of helping LICs address their unique challenges.Its multifaceted engagementdelivered through policy advice,capacity development,and lendinghas seen substantial evolution and

120、strengthening in recent years.Concessional financing through the PRGT constitutes an important part of the Funds support for LICs,with lending volumes reaching unprecedented levels over the past four years in response to the COVID-19 pandemic and subsequent shocks.3 During an informal IMF Board meet

121、ing on April 10,Executive Directors confirmed the role of the Fund in LICs and saw the PRGTs facilities architecture,as well as its eligibility framework,as broadly appropriate.At the same time,Directors supported or indicated that they could agree to explore staffs evolving proposals that(1)future

122、demand for PRGT lending will likely be below current levels but exceed pre-pandemic averages,(2)additional financing and lending policy changes are urgently needed to boost the PRGTs self-sustained annual lending capacity;and(3)there is scope for exploring further differentiation of lending terms to

123、 better reflect LICs heterogeneity.Support for other optionsincluding changing the blending ratio,lowering the per capita income thresholds for countries graduation from PRGT-eligibility,bringing blenders entirely under the PRGT,and extending loan maturitywas limited.On financing,Directors called fo

124、r exploring all options.At a subsequent meeting on July 16,Directors reiterated their support for a self-sustained PRGT and the need to find a lasting solution.There was broad support for the proposed lending envelope and the direction of lending reforms,while further clarifications were sought on t

125、he calibration of the proposals.While there had been significant support for a limited use of gold as an additional source of PRGT financing,most Directors agreed that the proposal to use a distribution of GRA net income or reserves was the most feasible option at this stage.International Monetary F

126、und.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 11 A.The Funds Multifaceted Engagement with LICs Integrated Approach 6.The Fund has a long history of helping its LIC members address their economic challenges and it has strengthened its support further in recent

127、 years.Within its mandate,the Fund focuses on helping LICs achieve,maintain or restore macroeconomic stability,creating an environment conducive to inclusive growth and development,and improving living standards including through poverty reduction.This agenda has received additional attention since

128、2020,as LICs required urgent support in navigating the challenges emanating from the COVID-19 pandemic,the war in Ukraine,and global monetary tightening(see IMF,2024).7.To maximize effectiveness,the Fund relies on an integrated approach that supports LICs across three dimensions.Policy advice.Suppor

129、t to LICs typically involves intensive engagement on policies and reform priorities in support of macroeconomic stability and inclusive growth.In response to the multiple shocks since 2020,the Funds bilateral and multilateral surveillance has focused first on helping countries sustain critical spend

130、ing(including to protect vulnerable households and firms from the shocks impact)and maintain buffers,and then on helping LICs tighten their macroeconomic policies to reduce debt-related vulnerabilities and address high inflation.Capacity development(CD).The Fund has significantly expanded its CD act

131、ivities for LICs,allowing spending to increase by over 40 percent between FY22 and FY23 alone.Technical assistance and training have become more closely integrated with policy advice and financing activities,and have responded flexibly to country needs especially on strengthening the capacity of cen

132、tral banks,ministries of finance,and statistical agencies.Financing.As discussed below,the Fund has significantly increased its financial support.Engagement Tailored to Country-Specific Needs 8.The Fund has further evolved in recent years to respond effectively to LICs diverse needs,recognizing that

133、 every situation is different.The institution has invested significantly in deepening its understanding of countries specific needs that can be addressed within the broad policy frameworks.For example,the Fund recently adopted a FCS strategy and a guidance note on Small Developing States(SDS)that es

134、tablish specific guidance for the institutions engagement with these types of countries,many of which are also LICs.FCS.The FCS strategy highlights that Upper Credit Tranche(UCT)-quality programs with FCS should sharpen focus on the distributional aspects of macroeconomic adjustment,and the pace and

135、 timing of structural reforms with respect to political economy dynamics and institutional capacities.Moreover,supporting program priorities with CD is critical.For countries where UCT-International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 12 INTERNATIONAL MONETARY FUND quality

136、programs are not feasible,the Fund can engage through a range of modalities including Staff Monitored Programs(SMPs)and emergency financing(EF)to address urgent BoP needs.SDS.The SDS guidance note underscores the unique economic vulnerabilities of these countries in an increasingly shock-prone world

137、.It recognizes the need for a comprehensive approach to engaging with SDS,including in areas like climate change,gender equality,inclusive growth,governance,and digitalization.Moreover,it calls for leveraging instruments such as the Resilience and Sustainability Facility(RSF)alongside the lending un

138、der the GRA and the PRGT,as well as strong partnerships with the WB and other international financial institutions,to help the Fund provide robust support to SDS.Closely Working with Others 9.Working closely with the WB and other partners has been an important dimension of the Funds engagement with

139、LICs.The scope of the collaboration with the WB reflects country-specific conditions and needs,and typically spans many areas of policy advice,CD,and lending(Annex II).The Fund cooperates with other partners such as the Regional Development Banks,member organizations of the United Nations family inc

140、luding the World Food Programme and the World Trade Organization,and bilateral donors on topics of shared interest both at the institutional level and in the context of country-specific macroeconomic adjustment programs supported by the Fund.B.The Funds Lending to LICs:Role and Recent Trends The Fun

141、ds Unique Role in Helping LICs Address BOP Problems,Mainly Through its PRGT 10.Where needed,the Fund assists its members with temporary financing to address their BoP problems.The Funds financial support helps smooth the adjustment necessary to address macroeconomic imbalances and mitigate the econo

142、mic and social impact of reforms.It is provided under both the GRA and the PRGT on a temporary basis and under adequate safeguards to help resolve different types of BoP problems.11.Concessional lending through the PRGT has evolved into the Funds main vehicle to provide financing to LICs,responding

143、well to these countries specific needs(see Annex I).Specifically,PRGT lending is guided by a set of core features:Addressing BoP problems,especially those of a protracted nature.Fund financial support is associated with the existence of a BoP problem.The Extended Credit Facility(ECF),which is the wo

144、rkhorse of the PRGT,supports members with a protracted BoP problem to make significant progress towards a stable and sustainable macroeconomic position.The concept of a“protracted BoP problem”accounts for the fact that imbalances in many LICs take a longer time International Monetary Fund.Not for Re

145、distribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 13 to resolve and are often associated with entrenched structural problems.4 In practice,the ECF allows for longer-term engagement and more gradual adjustment,and recognizes successive arrangements may be necessary.Catalyzing f

146、inancial support from other sources.Fund arrangements help boost the credibility of LICs macroeconomic policy frameworks and are expected to catalyze financing from multilateral and bilateral donors,as well as the private sector where relevant.This function is critical given LICs often sizeable BOP

147、needs and,beyond those,the vast demand for financing in support of their broader economic development objectives.Supporting poverty reduction and growth.Country ownership,and poverty reduction as well as growth objectives,are prominent dimensions of PRGT lending.The macroeconomic framework,program c

148、onditionality and fiscal targets in PRGT arrangements are derived from or made consistent with the objectives of fostering growth and achieving national poverty reduction strategies(PRS).Providing subsidized financial support.The Fund started concessional financial support in the mid-1970s with the

149、establishment of the Subsidy Account and,one year later,the Trust Fund,which provided loans to LICs at a lower interest rate and longer maturities than financing under the GRA(Annex VI).Since the introduction of the PRGT interest rate structure and adjustment mechanism in 2009,its implementation has

150、 been waived by the IMF Executive Board and interest rates have been continuously kept at zero for all members(Annex VI).Targeting the support to the poorest members.The limited volume of the Funds concessional lending resources puts a premium on their efficient use.5 The Fund thus relies on several

151、 policies to manage access,including restricting eligibility for PRGT financing(Annex IX),imposing access limits and norms(Annex IV),and limiting the level of access by higher-income LICs through access caps and PRGT/GRA blending requirements(Annex V).12.The Funds focus on BOP needs makes its lendin

152、g to LICs distinct from development financing by multilateral development banks and other donors.In particular,Fund financing is not earmarked to specific spending areas or development projects.Instead,it focuses on macroeconomic stability and external adjustment,comes exclusively in the form of loa

153、ns and thus needs to be repaid(usually in a shorter timeframe than development financing that typically involves 4 Under the Articles,the use of Fund resources in the GRA is contingent upon the existence of a BoP need,substantiated by the BoP deficit,reserve position,or developments in reserves.Inst

154、ead of solely relying on the members overall BoP position,assessment of a“protracted”BoP problem also considers various indicators,including:the evolution of exports and imports,changes in the terms of trade,access to capital markets,cost of debt service,and foreign exchange reserves.See Need as a C

155、ondition for the Use of Fund Resources,(SM/94/299)for further details.5 Achieving favorable PRGT lending terms involves securing both loan and subsidy resources,with the latter relying on limited donor resources or the need for broad consensus among members to mobilize internal resources and therefo

156、re often challenging to secure.The self-sustaining financial framework also relies on generating sufficient investment income to help cover subsidy requirements and administrative expenses.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 14 INTERNATIONAL MONETARY FUND more

157、 concessional or grant financing),and can be partly or even fully saved rather than spent when reserves are low.6 PRGT Lending Volumes,Use of Toolkit,Catalytic Effect,and Program Performance 13.Prior to the COVID-19 pandemic,PRGT lending volumes were broadly in line with the available resources in t

158、he PRGT under the self-sustained framework adopted in 2012.7 Consistent with its targeted nature and distinct mandate focusing on BoP needs,PRGT lending has covered,on average,1.7 percent of LICs Gross Financing Needs(GFN)and was mainly countercyclical:it increased significantly during crisis episod

159、es and declined thereafter(Figures 1 and 2).8 The small share of IMF lending in total loan and grant flows to LICs reflects the Funds catalytic role,and the broader mandate of other international financial institutions(IFIs)as well as bilateral official creditors and donors in providing development

160、finance.9 While annual disbursements under the PRGT ranged between SDR 0.5 billion and SDR 1.6 billion,annual lending commitmentsthat is,total new lending approved in a given yearaveraged around SDR 1.2 billion,broadly in line with the PRGTs estimated self-sustained capacity of SDR 1 billion.This pa

161、ttern reflected in part the existence of hard access caps,blending rules,and norms,which all worked to ensure consistency of lending volumes with levels that could be financed on a sustained basis.14.The COVID-19 pandemic triggered a sharp increase in demand for Fund concessional lending,which has r

162、eached unprecedented levels during the past four years.The Fund significantly stepped up its financial support for LICs amid a series of large shocks,starting with the COVID-19 pandemic,followed by the spike in commodity prices and the global food crisis in the wake of the war in Ukraine,and the par

163、allel tightening of international financial conditions.As a result,PRGT lending increased significantly in 2020covering 9.4 percent of LICs GFN(12.9 percent including GRA resources)before reverting to an average 2.8 percent of GFN over 2021-23(4.2 percent including GRA resources).Annual new lending

164、commitments under all PRGT facilities reflect this unprecedented spike in demand,averaging SDR 5.5 billion during 2020-2023,almost five times the level realized in the pre-pandemic decade(2010-2019).Total PRGT credit outstanding reached a record of SDR 18.3 billion at end-2023about three times the p

165、re-pandemic average(Figure 2).6 The CCRT provides relief on debt service in the form of grants that are funded directly through donors contributions.Both IMF loans and budget support by donors constitute,in effect,BoP support as they provide the recipient with foreign exchange but budget support is

166、usually fully spent and absorbed.Another difference is that the typically earlier repayment of IMF loans implies an earlier and larger unwinding of spending and absorption.For a more detailed discussion on this topic,see The Macroeconomics of Managing Increased Aid InflowsExperiences of LICs and Pol

167、icy Implications(IMF,2005),and The Funds Facilities and Financing Framework for LICs(IMF,2009a).7 See Proposal to Distribute Remaining Windfall Gold Sales Profits and Strategy to Make the Poverty Reduction and Growth Trust Sustainable.8 The share of Fund lending in LICs GFN amounted to around 2 perc

168、ent when including also the financing provided under the GRA.9 In this context,it is important to note that donor and creditor flows declined over the past twenty years as a share of LICs GNI:official development assistance(ODA)from the 32 members of the OECD Development Assistance Committee(DAC)fel

169、l from 6 percent to just over 2 percent despite increasing as a share of donor GNI.Multilateral flows declined from 2.6 percent to 1.8 percent of LIC GNI.International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 15 Figure 1.The Scale of Fund Lendi

170、ng Relative to Total External Financing to LICs Fund Lending and LICs External Financing Needs(US$billions)Fund Lending and Other Loan Disbursements to LICs by Creditor Category(US$billions)Sources:World Economic Outlook(WEO)and IMF staff estimates.Note:Country sample covers PRGT-eligible countries

171、in each year.GFN are defined as current account deficit plus external debt amortization.Sources:International Debt Statistics(IDS)and IMF staff estimates.Note:Country sample covers PRGT-eligible countries in each year.A significant amount of grant financing is also provided,notably by IDA,which prov

172、ided around US$6 billion to PRGT-eligible countries in 2022 on top of loans.15.This unprecedented support to LICs was made possible by a remarkable show of solidarity from the membership.Thanks to the steadfast support of over 40 PRGT contributors,the 2021 fundraising targets for PRGT loan and subsi

173、dy resources(SDR 12.6 billion and SDR 2.3 billion,respectively)were successfully met in 2023.Achieving this important milestone was also facilitated by SDR channeling from economically stronger members to the PRGT,providing the PRGT the capacity to mobilize much-needed support to the poorest members

174、.10 Following the successful completion of the 2021 loan fundraising round,the U.S.Congress authorized a US$21 billion loan for the PRGT(see further details below).10 Twenty advanced and emerging economy members have contributed loan resources(under both the 2020 and 2021 rounds):Australia,Belgium,B

175、razil,Canada,China,Denmark,Finland,France,Germany,Italy,Japan,Korea,Netherlands,Norway,Qatar,Saudi Arabia,Spain,Sweden,Switzerland,and United Kingdom.Forty-five PRGT partners have provided or pledged subsidy contributions under the 2021 round:Australia,Botswana,Brunei Darussalam,Bulgaria,Canada,Chin

176、a,Croatia,Cyprus,Denmark,Estonia,European Commission,Finland,France,Germany,Greece,Hungary,Indonesia,Ireland,Italy,Japan,Korea,Latvia,Lithuania,Malta,Mauritius,Morocco,Netherlands,Norway,Oman,Philippines,Poland,Portugal,Qatar,Saudi Arabia,Singapore,Slovak Republic,Slovenia,Spain,Sri Lanka,Sweden,Swi

177、tzerland,Thailand,Trinidad and Tobago,United Kingdom,United States.Further details can be found on the PRGT and SDR Channeling pages,and MDs Statement on the Achievement of Stage 1 Fundraising Targets for the PRGT.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 16 INTERNA

178、TIONAL MONETARY FUND Figure 2.Disbursements and Commitments to PRGT-Eligible Countries(Millions of SDRs)PRGT-Eligible Countries:GRA and Concessional Lending Disbursements,1988-2023 1/,2/Annual Commitments to PRGT-Eligible Countries,2010-23 1/,2/Source:IMF staff estimates.1/The list of countries is d

179、efined as those eligible for PRGT resources in each year.2/The data runs up to end-August 2024 3/GRA:General Resource Account.4/PRGT:includes all financing under the PRGT,the Poverty and Growth Facility(PRGF),and the Enhanced Structural Adjustment Facility(ESAF).Source:IMF staff estimates.1/In April

180、 2010,Albania,Angola,Azerbaijan,India,Pakistan,and Sri Lanka graduated from the PRGT;Amenia graduated in July 2013;Georgia graduated in April 2014;Bolivia,Mongolia,Nigeria,and Vietnam graduated in October 2015;Guyana in August 2020.2/The data runs up to end-August 2024.PRGT Outstanding Credit,Disbur

181、sements and Repayments,2010-23 Credit Outstanding per Facility 1/PRGT Lending:Disbursements and Repayments 1/Source:IMF staff estimates.1/The data runs up to end-August 2024.Source:IMF staff estimates.1/The data runs up to end-August 2024.16.The pandemic caused a temporary move towards EF,but the EC

182、F and ECF/Extended Fund Facility(EFF)blends had regained their status as workhorse instruments by 2021.Prior to the pandemic,most of the Funds support under the PRGT was provided through ECF arrangements that accounted for 22 out of 25 programs approved during the 2016-2019 period,underlining the pr

183、otracted nature of BoP needs in most LICs.Stand-by Credit Facility arrangements(SCFs)and the Rapid Credit Facility(RCFs)were used only occasionally(Figure 3).At the peak of the pandemic,in 2020,the emphasis shifted temporarily to EF under the RCF or,in the case of blenders,combined Rapid Financing I

184、nstrument(RFI)and RCF.Soon after,lending quickly transitioned back to upper credit tranche(UCT)-quality programs with their multi-year framework and ex-post conditionality:34 010203040506002,0004,0006,0008,00010,00012,00014,00020102012201420162018202020222024GRASCFRCFECFNumber of countries(right axi

185、s)030609012015002,0004,0006,0008,00010,0001988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024GRA 3/Exogenous Shocks FacilityStructural Adjustment FacilityPRGT 4/Oil price index(2010=100,rhs)Food price index(2010=100,rhs)International Monetary Fund.Not for Redistribution2024 PRGT REVIEWR

186、EFORM PROPOSALS INTERNATIONAL MONETARY FUND 17 countries out of the total 51 PRGT-eligible countries that received EF in 2020-21 subsequently resumed or transitioned to UCT-quality programs;and only seven EF requests have been approved since January 2022.As of August 1,2024,30 ECFs and ECF/EFF blend

187、s were in place,including five arrangements with countries that did not receive EF during the pandemic.Figure 3.Use of PRGT Facilities by Group of Countries,2010-24 Number of Approved Financing Requests 2010-19 Number of Approved Financing Requests 2022-24 Source:Monitoring of Fund Arrangements data

188、base(MONA).Note:Poorest LICs include 31 countries not meeting the income criteria for blending.Source:MONA.Note:Poorest LICs include 31 countries not meeting the income criteria for blending.17.The large-scale support since 2020 remained catalytic,even if the Fund initially assumed a larger share of

189、 total BoP support in line with its countercyclical mandate.For the median country,Fund financing typically covered between 30-40 percent of the total residual BoP financing gaps(not to be confused with the overall financing needs as proxied by the GFN)in the years following the pandemic,and thus a

190、slightly higher share compared with the long-term median that also includes periods of economic tranquility(Figure 4).That said,2023 saw a reversion of this trend.11 11 Taking a broader perspective than only BoP financing,recent Fund analysis indicates that additional Fund disbursements of one perce

191、ntage point(pp)of GDP in the context of IMF financing arrangements were associated with additional official development assistance of 2 pp of GDP,about half of which is from multilateral donors(He,Velasquez and Johnston,2024).Moreover,looking at the pandemic era,countries that received IMF EF were a

192、lso often recipient of higher COVID-related financial commitments from other financial institutions including the WB(IEO,2023;Cohen-Setton and Toni,2024).International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 18 INTERNATIONAL MONETARY FUND Figure 4.Median IMF Financing Share,200

193、5-23(Percent of financing gap in UCT programs)Sources:IMF country reports for program requests and IMF staff estimates.The data cover 135 UCT-quality programs that were approved by the IMFs Executive Board for 53 LICs between 2005 and 2023,accounting for about 90 percent of all UCT programs approved

194、 for LICs during the sample period.The figure includes three important crisis episodes during the sample period which are highlighted in blue:the global financial crisis(2008-10);the commodity price shock(2016-17);and the COVID-19 pandemic and after shocks(2020-23).18.Emerging evidence suggests that

195、 PRGT-supported programs played an important role in helping LICs cope with recent shocks.While it is too early to draw firm conclusions,evidence suggests that Fund financing and coordinated support from other development partners during the pandemic and subsequent shocks helped countries sustain cr

196、ucial spending and maintain buffers in the face of increasingly tight financial conditions.Moreover,a recent study(Batini and Li,2023)finds that the IMFs strong financial support to LICs led to stronger recoveries from the pandemic than would otherwise have been possible,and limited economic losses.

197、19.Nevertheless,further strengthening program implementation remains crucial.Meeting program targets,including on social spending,has remained a challenge and the overall pace of fiscal and external adjustment in LICs has been gradual.12 Completion of structural reforms has also faced challengesincl

198、uding as a result of widespread socio-economic fragilities and institutional weaknesses in many LICs.The upcoming RoC will present a more comprehensive analysis of these issues and consider options to further underpin strong economic policies and reforms.Two Implications of the Recent Trends for the

199、 2024 Review of Facilities and Finances 20.The architecture of PRGT facilities remains well-aligned with members needs.The picture established above,as well as responses received from a survey of mission chiefs,suggests that the current PRGT facilities architecture is sufficiently flexible to meet m

200、embers different types of BoP needs.The Fund was able to step-up EF during the pandemic,and then return quickly to UCT-quality programs that are better suited to address countries macroeconomic imbalances and manage risks to the Fund.The fact that SCF usage has become less frequent in recent years i

201、s 12 IMF(2024).Macroeconomic Developments and Prospects for LICs2024.0102030405060702005200720092011201320152017201920212023 Interquartile rangeMedian(yearly)Median(all years)International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 19 consistent

202、with its role of providing short-term support,which has become less relevant during the recent years characterized by protracted BoP needs.The Food Shock Window under the RCF and RFI,created in 2022 for a limited time(until end-March 2024)to address BoP shocks associated with the food and energy pri

203、ce spike,also demonstrated that the current architecture can be temporarily adjusted in response to specific shocks.The PRGT toolkit has also remained relevant for FCS and SDS,within a broader set of engagement options(see Paragraph 8).13 21.Under current trends the PRGTs self-sustained lending capa

204、city would fall to about SDR 1 billion per year by 2027.14 Despite the successful completion of the first-stage of PRGT fundraising,launched in 2021,PRGT subsidy account resources could be fully committed by around 2027.At that point,new lending would need to fall to about SDR 1 billion per year(Fig

205、ure 5)since using the principal of the Reserve Account for subsidization would not be consistent with the current PRGT framework on Reserve Account resources.15 Figure 5.Simulation of PRGT Assets in the Reserve Account and Subsidy Accounts(2020-35)(In SDR billion)Subsidy Accounts resources could be

206、fully earmarked by 2027.New lending commitments would need to fall to self-sustained capacity(below SDR 1 billion)to avoid eroding the Reserve Account.Source:IMF staff estimates.Note:The shaded area marks simulation period.Projected evolution of PRGT assets is subject to uncertainty,notably regardin

207、g lending volumes and interest rates.This simulation assumes that annual new PRGT lending commitments will be around SDR 7 billion in 2024 and in line with the central policy scenario(Box 2)until 2026.From 2027 onwards new commitments are assumed at somewhat below SDR 1 billion.13 As of August 2024,

208、12 PRGT-eligible FCS have on-track UCT-quality programs under the PRGT,(one more is implementing a Staff Monitored Program).SDS have relied much less than other LICs on IMF EF and UCT arrangements in recent years.14 The SDR interest rate,which averaged less than percent in 2020,reached an average of

209、 over 3 percent in 2023.15 Existing subsidy resources would be committed by 2026 if lending is at an average annual volume of about SDR 5 billion,or 2028 if lending is at an average volume of about 3 billion(based on assumed average annual lending from 2024 to 2026 and 2024 to 2028 respectively).The

210、 calculation includes potential savings from changes to the PRGT interest rate framework discussed below but excludes additional bilateral contributions.0.01.02.03.04.05.06.07.08.00.01.02.03.04.05.06.07.08.09.02020202120222023202420252026202720282029203020312032203320342035Assets in the Subsidy Acco

211、unts(lhs)Assets in the Reserve Account(lhs)New annual commitments(simulation,rhs)International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 20 INTERNATIONAL MONETARY FUND THE PRGT LENDING ENVELOPE The recent series of global shocks have led to record PRGT lending levels,reducing the

212、 PRGTs self-sustained lending capacity to only SDR 1 billion from 2027 onwards.While overall demand for Fund concessional financing is expected to gradually decrease from recent peaks,it will likely remain well above pre-pandemic levels.Building on demand projections and available resource options,s

213、taff proposes a self-sustained long-term lending envelope of SDR 2.7 billion per year for the PRGT.This envelope would allow the Fund to continue providing critical policy and financing support to an increasingly diverse group of LICs while being feasible from a funding perspective.A.Borrower Demand

214、:Some Normalization but Higher Than During 2010s 22.LICs total GFN remain large and are expected to increase further.According to staffs projections,LICs baseline external GFN,defined as the sum of current account deficits and external debt amortization,are expected to increase from US$154 billion i

215、n 2024 to US$173 billion in 2028,totaling around US$820 billion for the period 2024-28.This large number does not yet account for additional important and urgent needs such as rebuilding external buffers further,a more ambitious development agenda,and climate change adaptation and mitigation.16 Mobi

216、lizing large-scale financing for LICs thus remains a priority.It will require a concerted effort involving more domestic revenue mobilization and accelerated structural reforms,as well as financing from external partnersincluding IFIs,official bilateral creditors and donorsand the private sector.Wit

217、h its focus on supporting LICs facing BoP needs,the PRGT is part of this collective effort.23.At the same time,staff expects demand for PRGT financing to decline from the recent peaks.As discussed in the previous section,the BoP needs that PRGT financing helps address are only a small component of c

218、ountries overall external financing needs.Moreover,many LICs have recalibrated macroeconomic policies to rebuild buffers and reduce deficits.BoP needs should thus decrease,leading to a gradual decline of the unprecedented concessional Fund support provided to LICs recently.Looking ahead,more robust

219、growth prospects,an easing of global financial conditions,and a gradual reduction of debt vulnerabilities could also lower demand for PRGT financing by moving some countries from PRGT-only to presumed-blender status and facilitate the graduation of others from the PRGT.17 24.However,demand for PRGT

220、financing is expected to remain well above its pre-pandemic average.Two main factors come into play:16 See Macroeconomic Developments and Outlook Prospects for LICs2024(IMF,2024)17 Medium-term projections were constructed using WEO projections of gross external financing needs for PRGT-eligible coun

221、tries and assumptions on the share of PRGT financing in covering these needs over time.Long-term projections are based on assumptions on the probability of countries accessing PRGT resources,access levels per facility,trend in nominal growth and blending,and PRGT eligibility status.See Annex III.Int

222、ernational Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 21 Significant vulnerabilities will persist for the foreseeable future.The effects of post-pandemic scarring will likely sustain the demand for Fund support in many LICs over the coming years,

223、followed by a gradual deceleration towards the long-term lending average.A more shock-prone world.While a recurrence of the unprecedented shocks of the past few years appears unlikely,the average frequency and magnitude of shocks affecting LICs external positions are likely to remain higher than bef

224、ore the COVID-19 pandemic.This reflects growing risks associated with extreme weather events and climate disasters,a higher incidence of violent conflicts and social unrest,and the potential for steep commodity price fluctuations and trade diversion in the context of the global energy transition and

225、 geopolitical fragmentation.25.In addition,the financing needs and economic characteristics of LICs are increasingly differentiated.18 One dimension is the duration of countries financing needs:a substantial subset of LICs face chronic BoP needs emanating from structural current account deficits,whi

226、le others may require BoP support only temporarily when hit by an exogenous shock.Another dimension is the capacity to absorb different financial terms and conditions,reflecting differences in countries income level.This diversity among LICs,which emanates from their heterogeneous economic and insti

227、tutional characteristics,has increased in recent years(see Box 1 on income heterogeneity):The poorest LICs,which are also often fragile and little diversified,are most in need of Fund concessional support.Thirty-one of the 69 LICs still fall into this category,even if their number has fallen over re

228、cent years as more countries have crossed the International Development Association(IDA)operational cutoff(at US$1,335 for FY2025;Annex IX.Box 1).Their economies often face a structural FX gap that requires exceptional BoP financing on a protracted basis.Moreover,weak institutions and non-diversifie

229、d economies make these countries more susceptible to shocks and magnify their impact,while access to international capital markets may not be available or affordable.Due to their limited potential to generate FX earnings and fiscal revenues and,consequently,to shoulder higher cost of external financ

230、ing,it will remain critical for these countries to continue to receive Fund support on the most concessional terms.Higher-income LICs,including many SDS and frontier markets,typically require shorter-term BoP financing from the Fund,while the level of concessionality may be less critical.Their relat

231、ively stronger FX earnings and fiscal revenues,as well as more developed economic institutions,enable them to tap international markets for an important share of their FX needs.For these countries,access to exceptional BoP financing can play a useful insurance role that can be activated in case the

232、economy is hit by a negative shock,particularly in the context of a temporary loss of market access.This means that the level of concessionality of the Funds support is often a less critical consideration than the volume of financing available when 18 See 10-14 and Box 2,Macroeconomic Developments a

233、nd Prospects for LICs2024(IMF,2024),for additional details on LIC heterogeneity.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 22 INTERNATIONAL MONETARY FUND compared with their poorer peers.Moreover,with part of their borrowing at commercial rates,the provision of a rel

234、atively small portion of total borrowing at concessional interest rates is not a primary determinant of their debt sustainability.Box 1.Income Heterogeneity of PRGT-Eligible Countries The Funds LIC members comprise a diverse set of countries.At one end of the income spectrum are the poorest members

235、with few financing options;on the other are those countries that are approaching graduation from the PRGT with much higher per capita income levels and robust market access.1 The heterogeneity across LICs has become more pronounced during the past 15 years.Out of the 82 countries that were eligible

236、for PRGT financing in 2009,13 have graduated in the meantime.Moreover,since 2009,per-capita income has increased above the IDA threshold in 13 other LICs.On the other hand,per-capita income has dropped below the IDA threshold in a few countries,and some of the poorest LICs are further away from the

237、IDA threshold today than they were in 2009.As a result of these heterogeneous trends,income dispersion across LICs has increasedfor the current PRGT-eligible countries,the poorest LIC(among non-small states)had a per capita GNI equivalent to 4 percent of the GNI per capita of the richest LIC in 2022

238、,down from 8 percent in 2009(WB World Development Indicators(WDI)data).These dynamics reflect deep-rooted challenges and have been exacerbated by the recent shocks.2 Per Capita GNI(2009 vs 2022 PRGT-Eligible Countries)Income Progression Among 2009 non-SDS PRGT-Eligible Countries Source:WB WDI data.N

239、ote:Country sample covers PRGT-eligible countries in each year.Data is missing for 5 countries in 2009 and 2 countries in 2022.Source:WB WDI data.Note:Djibouti,Somalia,Yemen,Eritrea and South Sudan are excluded due to missing data.PRGT-eligible SDS are not included in this chart._ 1 PRGT-eligible me

240、mbers GNI income per capita in 2023 ranged from US$240 to over US$11,000,with a median of US$1,610.Many of the wealthiest LICs are SDS.2 See Macroeconomic Developments and Prospects for LICs2024(IMF,2024).B.Calibrating a Self-Sustained PRGT Envelope Meeting Members Needs 26.Staff calibrated a lendin

241、g envelope that would allow the Fund to continue providing critical policy and financial support to LICs,while being feasible from a funding perspective.Specifically,staff estimated a likely corridor of future demand for PRGT resources by using scenario International Monetary Fund.Not for Redistribu

242、tion2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 23 analysis,which is particularly well suited to account for substantial uncertainty in projections.The scenarios integrate bottom-up projections for 2024,medium-term projections based on projected external GFN for 2025-29,and long-ter

243、m estimates based on assumptions about the likelihood and size of access to PRGT resources.Taking the demand corridor as a starting point,staff then narrowed the projection interval to a range built around a credible central policy scenario that takes into account PRGT resources that could credibly

244、be mobilized-(See Box 2 and Annex III).27.Taking into account support from other development partners that it helps catalyze,a long-term PRGT annual lending envelope of SDR 2.7 billion would meet LICs financing needs.A PRGT self-sustained long-term annual lending capacity of SDR 2.5-3.0 billion,with

245、 a central policy scenario of SDR 2.7 billion,together with other financial support it helps catalyze,would achieve the twin objectives of meeting future demand with sufficiently high probability and being feasible on the basis of a credible and realistic PRGT funding strategy(Figure 6,and Box 2).Im

246、portantly,the proposed lending capacity,which is more than twice the pre-pandemic level,would accommodate temporary episodes of high demand for UCT-quality programs;EF to address urgent BoP needs;average access in line with the proposed norm(see below);a buffer for large programs;periodic adjustment

247、s of access norms and limits;and assumed graduation of some countries in line with the growth of their gross national income(GNI)per capita.The staffs estimates account for higher demand in the medium termalthough at levels lower than the recent peakbefore lending levels converge to their long-term

248、average.28.Staff plans to carefully monitor the evolution of borrowing and lending capacity and propose measures as necessary to preserve the self-sustained model.While the PRGTs financing model is sufficiently flexible to accommodate temporary periods of extraordinary demand,the lending capacity is

249、 sensitive to risks including lower investment returns and average financing needs exceeding the base envelope by a substantial margin for an extended period.Staff will carefully review demand and supply trends in the context of the annual reviews of the adequacy of PRGT resources.29.As a safeguard,

250、an ad-hoc review would be triggered should demand projections deviate significantly from the self-sustained lending envelope.In the event of indications that demand could exceed a corridor around the self-sustained long-term annual lending capacity of SDR 2.5-3.0 billion for a protracted period,or i

251、f available resources fall short of what is needed to sustain this level of lending,an ad-hoc review would consider a range of policy options and contingency measures under the three-pillar PRGT framework.19 Potential policy options include additional measures to constrain demand such as tightening

252、access limits and norms or restoring hard caps,and/or increasing interest rates.Lending capacity could also be boosted,or sustained,if resources fall short of projections,through additional bilateral fundraising and/or further use of 19 See Annex I in 2024 Update of Resource Adequacy of the PRGT and

253、 the Debt Relief Trusts.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 24 INTERNATIONAL MONETARY FUND internal resources,such as through a further suspension of GRA reimbursement.The appropriate measures would depend on the nature of the challenges.Figure 6.Future PRGT L

254、ending Envelope(SDR billion)Source:IMF staff estimates.Notes:Estimates of expected annual commitments on a subsidy use basis.The dark blue line marks staffs proposed lending envelope,which would converge to SDR 2.7 billion in the long term.The dark orange area is calibrated to reflect shocks to key

255、assumptions underpinning projected average access but not a combination of shocks or persistent deviations in access frequency.For more details on the methodology and assumptions see Box 2 and Annex III.Box 2.PRGT Demand Estimates and Central Policy Scenario Methodology for estimating the likely cor

256、ridor of future demand and a credible lending envelope takes into account information on the near-term demand,projected GFN in the medium term,and assumptions on the share of PRGT financing in LICs GFN,and on the future likelihood and size of LICs access to PRGT resources(see also Annex III).Methodo

257、logy Medium-term demand estimates are anchored on external GFN projections and the assumed evolution of the share of PRGT lending in these GFN,starting from 2024 demand estimates.The starting point is the share of PRGT lending in GFN in 2024,estimated at 5 percent,consistent with the projection of a

258、round SDR 7 billion in new lending commitments for 2024 that reflects assumptions informed by consultations with country teams and a high amount of expected disbursements from existing arrangements approved in the past years.Medium-term projections(5 years out)then assume a gradual decrease in the s

259、hare of PRGT disbursements in GFN,in line with the expectation of a gradual reduction of demand from recent peaks.Different scenarios for this decrease are considered to create a low,high and central scenario(see below).Annual demand for PRGT financing is calculated by applying for each year the ass

260、umed share of PRGT disbursements in GFN to the corresponding World Economic Outlook(WEO)GFN projection.Long-term demand projections reflect assumptions about the likelihood and average access of financing requests.The approach follows the standard methodology used in previous PRGT Reviews.The model

261、applies assumptions on(1)the probability of countries accessing PRGT resources;(2)access levels;(3)trend growth of per-country access levels over time to avoid erosion of access in real terms;and(4)blending International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIO

262、NAL MONETARY FUND 25 Box 2.PRGT Demand Estimates and Central Policy Scenario(concluded)status and graduation from PRGT eligibility.Long-term demand is defined as the models projected average demand over the next decade.For the current exercise,it is used in all scenarios as projected annual average

263、lending from 2030 onwards.Unconstrained Demand Corridor Staff constructs low and high demand scenarios for PRGT lending based on assumptions on the state of the world.Scenarios assume higher financing needs in the medium than in the long term reflecting a gradual unwinding of the lingering macroecon

264、omic imbalances in the aftermath of the recent shocks.The low demand scenario reflects a generalized return to a pre-pandemic patterns of demand.Specifically,medium-term demand projections assume that the share of PRGT disbursements in GFN will gradually decline to the pre-pandemic(2010-19)average b

265、y 2029.Similarly,for the long-term,staff assumes that the likelihood of requests would broadly correspond to the pre-pandemic average.The one exception to this assumption would be more requests for EF,consistent with expectations of a more shock-prone world.Annual demand in such a scenario would ave

266、rage SDR 2.3 billion in the medium-term and SDR 2.0 billion in the long term.The high demand scenario assumes sustained elevated demand and,correspondingly,higher access.Medium-term projections assume the share of PRGT disbursements to decline only to the average of the pandemic period(2021-23),whil

267、e GFN would remain 10 percent above those projected in the 2024 WEO to reflect additional shocks.Staff calibrates the longer-term model based on past episodes of high demand(e.g.,following the global economic and financial crisis and the COVID-19 pandemic).In this scenario,demand increases to an ann

268、ual average of SDR 3.8 billion in the medium term and SDR 3.4 billion in the long term.Central Policy Scenario Staff derives a central policy scenario consistent with staffs proposed access policies that balances financing needs and available resources.In the medium-term,the share of PRGT disburseme

269、nts would gradually return to the mid-point between the 2010-19 and 2021-23 averages.The central scenario is derived using long-term likelihood of programs set between the low and high demand scenarios,thus accounting for a more shock prone world.The average assumed access accommodates potential add

270、itional demand stemming from(1)a greater distance between the norm and access limits than in the past and(2)large nominal programs that contributed significantly to PRGT demand in recent years,especially between 2021 and 2023,even if these are assumed to occur at a lower frequency in the future prox

271、ied by their average incidence over the 2010-2023 period.In such a scenario,staff estimates a lending envelope of SDR 3.2 billion for the medium term and SDR 2.7 billion for the long term on a subsidy-use basis(reflecting that some demand for SCFs will be precautionary).Sensitivity analysis to key a

272、ssumptions,including the impact of large nominal programs(SDR 0.3 billion in annual demand),or of nominal access growth(SDR 0.3 billion),suggests a range between SDR 2.5 billion to SDR 3.0 billion as a credible estimate for an adequate long-term lending capacity.International Monetary Fund.Not for R

273、edistribution2024 PRGTREFORM PROPOSALS 26 INTERNATIONAL MONETARY FUND LENDING POLICY CHANGES Staff proposes differentiated lending terms to better reflect heterogeneity across LICs.By construction,these differentiated terms also act as an automatic stabilizer to reduce the drain on PRGT resources em

274、anating from the cost of the interest rate subsidies that are provided under the Trust.In addition,staff proposes reverting the PRGT access norm to the level that prevailed before the temporary increase in 2023(145 percent of quota),while maintaining the PRGT annual(AALs)and cumulative access limits

275、(CALs)at their current levels(respectively 200 and 600 percent of quota).The reduced norm would be a key lever to ensure PRGT lending stays within the targeted envelope,while the unchanged access limits allow flexibility for cases where access above the norm would be justified.Finally,recalibrating

276、the PRGTs safeguards would help mitigate the risks associated with higher credit exposure and reinforce the anchoring role of the new norm.While the lending policy changes proposed in this section would become effective on January 1,2025,the new interest rate mechanism would become effective on May

277、1,2025 to reduce significant operational risks.A.Introducing a Differentiated PRGT Interest Rate Structure 30.Staff sees a strong case for further differentiating PRGT lending terms through a tiered interest rate structure to reflect LICs increasing heterogeneity.The poorest LICs are typically facin

278、g high and long-lasting financing needs while having very limited access to international financial markets and less adequate external and fiscal buffers.In contrast,frontier market LICs have more diversified economic structures,stronger institutions,and access to markets.This supports the case for

279、differentiating interest rates across LICs,to better target and strengthen further the efficient use of overall scarce concessional lending resources particularly during periods of high interest rates.By charging the better-off LICs a positive interest rate tied to the SDRi,the differentiated intere

280、st rate structure would also act as an automatic stabilizer to reduce the pressure on PRGT resources coming from the subsidization of interest rates.Staff Proposal Country Tiering Based on the Blending Policy 31.Staff assesses that the PRGT blending policy has been effective in targeting the Funds l

281、imited concessional resources to the poorest LICs and remains adequate.The 2021 reforms on blending rules and caps established three groups of LICs and further enhanced the focus of PRGT resources on the poorest(see Annex V).The blending policy uses income as the primary criterion to offer the most

282、favorable support to the poorest LICs with GNI per capita below a certain cutoff(see Box 3).20 For the countries with GNI per capita higher than the cutoff,it then distinguishes between 20 In line with the Articles of Agreement(Article V,Section 12(f)(ii),the IMF Board has applied GNI per capita as

283、a measure of relative poverty and therefore need for concessional support both in the PRGT but also in the other IMF Trusts such as the CCRT.In the RST,while no Special Disbursement Account(SDA)resources are involved,GNI per(continued)International Monetary Fund.Not for Redistribution2024 PRGT REVIE

284、WREFORM PROPOSALS INTERNATIONAL MONETARY FUND 27 countries based on their debt vulnerabilities that could limit market access,taking into account past market access and whether the country is a small or micro state.21,22 Blending rules and access caps have long been used as important tools to optimi

285、ze the use of PRGTs scarce resources,including by prioritizing the poorest LICs.At the same time,blended financing is a positive signal for countries that are successfully moving toward emerging market status.Box 3.Criteria for Presumed Blending Under the current blending policy,which was reformed i

286、n 2021,1 countries are presumed to blend if they(i)meet the income criterion for blending and(ii)do not have debt vulnerabilities that limit their access to international financial markets.Countries that do not meet one or both criteria are not required to blend.A country is deemed to meet the incom

287、e criterion for blending if its GNI per capita has exceeded the IDA operational cutoff by at least 5 percent for two consecutive years.Having met the income threshold,the country continues to meet it,provided that income per capita does not fall below 95 percent of the IDA operational cutoff.2 Shoul

288、d income per capita fall below this level,the country no longer meets the income criterion.A country is deemed to have debt vulnerabilities that limit its access to international financial markets if it is assessed to be(i)in debt distress or(ii)at high risk of debt distress and either(a)has had lim

289、ited past market access as specified under the blending policy or(b)is a small/micro state.The blending framework hence focuses primarily on countries per capita income,but also takes into account the impact of debt vulnerabilities on access to financial markets._ 1 See Fund Concessional Financial S

290、upport for LICsResponding to the Pandemic.2 The IDA operational cutoff is based on GNI per capita(Atlas method)and is updated annually in July.32.Differentiating interest rates in line with the blending policy would further strengthen the efficient use of PRGT resources.This proposed PRGT tiered int

291、erest rate structure(price approach),aligned with the existing tiered PRGT access structure(volume approach),would ensure a coherent framework:PRGT resources and the most favorable lending terms would be focused on the poorest LICs.All PRGT-eligible countries would be supported through differentiate

292、d levels of capita income was also used for RST eligibility.See Catastrophe Containment and Relief Trust:Policy Proposals and Funding Strategy(IMF,2020),and Proposal to Establish A Resilience and Sustainability Trust(IMF,2022).21 All the 19 PRGT-eligible SDSs are above the GNI per capita cutoff but

293、special consideration is given to account for their inherent vulnerabilities.Hence,the policy specifies that only small and micro states meeting the income criterion and having a low or moderate risk of debt distress are required to blend,regardless of their market access.The recently published 2024

294、 guidance note on engagement with SDS underscores a tailored approach to address the unique economic vulnerabilities of these countries in an increasingly shock-prone world.22 FCS status is not considered in the tiering because FCS criteria extend beyond economic factors,such as the number of casual

295、ties or the size of refugee populations,which are subject to frequent change,and do not necessarily reflect the relative financial strength of the country compared to other PRGT-eligible countries.As well as heterogeneity in the nature of fragility,60 percent(18 out of 30)of LICs currently listed as

296、 FCS are below the GNI per capita cutoff,whilst some FCS are higher-income and are successfully accessing markets.The IMF FCS strategy provides guidance to staff for tailored support to FCS.International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 28 INTERNATIONAL MONETARY FUND con

297、cessionality until they are no longer PRGT-eligible.Under this approach,the country groups would be as follows(see Table 1):Tier 1(“the lowest income”).PRGT-eligible countries that do not meet the income criterion for blending(see Box 3).These countries,when seeking access to concessional financing,

298、are not required to blend and are eligible for PRGT exceptional access with no cap.Tier 2(“the higher-income”).PRGT-eligible members that meet the income criterion for blendingfurther divided in two subgroups:o Tier 2A(“the higher-income,presumed blenders”).Higher income PRGT-eligible members that d

299、o not face elevated debt vulnerabilities that limit their access to international financial markets.These members are required,when seeking PRGT access,to blend PRGT and GRA resources at a 1:2 ratio.They are also subject to a per-arrangement cap at the norm,and a hard cap on total PRGT volume at the

300、 normal access limits.That means that these countries are not eligible for exceptional access under the PRGT.o Tier 2B(“the higher-income,non-presumed blenders”).Higher income PRGT-eligible members that face debt vulnerabilities that limit their access to international financial markets and tend to

301、face higher economic vulnerabilities than Tier 2A countries(Box 5).While not required to blend when seeking PRGT access,they are subject to a hard cap on total PRGT volume at the normal access limits and are not eligible for PRGT exceptional access.33.The country groups are expected to be broadly st

302、able with limited risks of“cliff effects”,notwithstanding periodic changes in tiering status.The current blending rules contain a set of robust checks for changing members blending status.With this built-in hysteresis,past movements across country groups have been quite rare(Box 4).Nevertheless,staf

303、f plans to monitor the risks of cliff effects closely and periodically update the Board on developments.Box 4.Stability of Country Tiers Applying current blending rules to historical data shows that movements between country groupings would have been infrequent.Staff assessed potential“cliff effects

304、”in the borrowing rate if the blending rules had been applied also to pricing by analyzing past incidences of two types of movements under the current blending rules:(1)in and out of groups that would trigger changes in borrowing costs;and(2)movement from Tier 1 to Tier 2A,which would result in a su

305、dden large increase in a countrys PRGT borrowing rate for a marginal increase in per capita income.Two conclusions emerge from this work:Country tiers would have been relatively robust.Over 75 percent of countries would have stayed in the same country grouping between 2019 and 2023,suggesting a high

306、 degree of stability in the country groupings as determined by the current blending criteria(Box 4.Table 1).This is especially the case for Tier 1 countries,which change tier only based on changes in GNI per capita.Looking at a longer period,changes would have occurred in only 5.5 percent of all cou

307、ntry-year observations,mostly induced by changes in debt vulnerability assessments and market access status(Box 4.Table 2).The income-induced changes would have been mostly movements from Tier 1 to Tier 2A.International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATION

308、AL MONETARY FUND 29 Box 4.Stability of Country Tiers(concluded)Countries do not appear to move in and out of tiers excessively.Based on the number of possible tier changes,1 only 0.5 percent of changesaffecting four countries(Myanmar,Tajikistan,Yemen and Zambia)would have involved multiple changes b

309、etween tiers due to income changes.The majority of these would have been caused by major crises including conflicts.As expected,repeated moves across tiers,while being rare,would have been more frequent due to changes in debt sustainability or market access.Box 4.Table 1.Stability of Country Tiers O

310、ver a 5 Year Horizon(2019-2023)Source:IMF staff estimates.1/Countries remaining in the same group over the period.Box 4.Table 2.Changes of Country Tier Status Between 2009 and 2023 Source:IMF staff estimates.1/14 countries would experience multiple reclassifications._ 1 Each member is assumed to be

311、assessed on an annual basis across income,debt,and market access.Hence over the fifteen-year period(2009-2023),there are 966(14 years x 69 members)opportunities for change or“observations”.Tier 1Tier 2ATier 2BGrouping at end-2022302019Stable countries 1/271515 Share of stable countries 90.075.078.9

312、Current Blending Rules number of countries In percent International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 30 INTERNATIONAL MONETARY FUND 34.A transitional arrangement is proposed to mitigate the“cliff effect”and prevent poorest LICs from prematurely moving to a higher income

313、tier solely due to GDP rebasing.In cases where GDP rebasing would increase GNI per capita above 105 percent of the IDA operational cut-off,the application of the income criterion,and consequently the potential application of the interest rate mechanism and the blending policy,would be postponed unti

314、l GNI per capita data are obtained for three consecutive years starting from the official release date of the rebased GDP series.This transitional arrangement will also be applied retroactively to all countries that rebased their GDP since the onset of the COVID-19 pandemic in 2020 and subsequently

315、exceeded the 105 percent GNI per capita of the IDA operational cut-off.For these countries the three-year transition period would start to apply from the effective date of the new interest rates mechanism.This transitional arrangement would not apply to countries that already exceeded 105 percent of

316、 the IDA operational cut-off in the year prior to the official release date of the rebased GDP series.Table 1.Country Groupings Under Staffs Proposal Source:IMF staff estimates.1/The Atlas method for GNI per capita applies a conversion to smooth fluctuations in prices and exchange rates.More informa

317、tion on IDA GNI per capita Atlas Method and eligible countries can be found here:https:/ida.worldbank.org/en/about/borrowing-countries.The FY25 IDA operational cutoff is$1,335,the blending threshold is$1,335*1.05=$1,402.2/Small and micro states.3/Frontier countries.4/2023 GNI data missing and 2022 d

318、ata(or earlier data)is used.5/Taking into account staff proposal for countries where a GDP rebasing has been implemented.International Monetary Fund.Not for Redistribution2024 PRGT REVIEWREFORM PROPOSALS INTERNATIONAL MONETARY FUND 31 Lending Rates:A Differentiated Interest Rate that Favors the Poor

319、est Countries 35.Based on the tiering structure described above,staff proposes differentiated interest rates with a mechanism to adjust more frequently to changes in SDRi(Annex VI).Staff proposes to replace the current interest rate mechanism23 with a new tiered interest structure,based on the count

320、ry groups defined above.This new mechanism would not differentiate by facility type to avoid any possibility that interest rate considerations might affect the selection of PRGT facilities rather than the nature of a countrys underlying BoP need.Staffs proposal would therefore apply to interest rate

321、s applicable to all PRGT facilities(ECF,RCF,and SCF).Specifically:The interest rate for Tier 1 countries would be set at zero,thereby maintaining the current level of concessionality for the poorest and most vulnerable PRGT-eligible members.The interest rate for Tier 2 countries would be set as a fr

322、action of the SDRi calibrated to remain well below the GRA rate and market rates(Table 2).o The interest rate for Tier 2A countries(higher income presumed blenders)would be set at 70 percent of the prevailing SDRi,below the GRA interest rate(SDRi plus basic margin)which applies to the GRA portion of

323、 their blended financing.o The interest rate for Tier 2B countries(higher income non-presumed blenders)would be set at 40 percent of the prevailing SDRi.Staff suggests a lower interest rate for these countries relative to Tier 2A to account for the presence of more pronounced debt vulnerabilities an

324、d generally weaker macroeconomic performance(Box 5).Notwithstanding the new interest rate,Tier 2B countries borrowing costs on PRGT loans would continue to be significantly below GRA rates.23 Interest rates are currently set for two years through biennial reviews and their level is linked to the ave

325、rage SDR interest rate over the most recently observed 12-month period.The rate charged on SCF loans was originally set at 25 basis points above that for the ECF,but aligned with the latter in 2019.In June 2023,the Executive Board approved the postponement by two years of the periodic review of PRGT

326、 interest rates,leaving them at zero.Interest rates on RCF loans were permanently set at zero in 2015.See PRGTReview of Interest Rate StructurePostponement(IMF 2023).International Monetary Fund.Not for Redistribution2024 PRGTREFORM PROPOSALS 32 INTERNATIONAL MONETARY FUND Table 2.Criteria for Countr

327、y Groupings,PRGT Access,and PRGT Interest Rates 1/Income Criterion Market access criterion Access to PRGT Interest rate on new post-reform PRGT arrangements Tier 1(lowest income)Do not meet Not applicable Uncapped,non-presumed blenders 0 percent Tier 2A:Meet Presumed blenders(1:2 PRGT:GRA)with PRGT

328、access capped per arrangement at the norm;and at the AAL/CAL 70 percent of SDRi Tier 2(higher income)Meet Tier 2B:Do not meet Non-presumed blenders with PRGT access capped at the AAL/CAL 40 percent of SDRi 1/Criteria set by the Funds(unchanged)blending policy governing access to PRGT resources.Box 5

329、.Comparison of Macroeconomic Vulnerabilities Across Country Tiers PRGT-eligible countries in Tier 2A and Tier 2B have comparable income levels but differ in their macroeconomic vulnerabilities.Tier 2A and Tier 2B median incomes are broadly comparable,even if Tier 2B countries GNI per capita incomes

330、are very heterogeneous due to the large number of SDS in this group that benefit from higher income cutoffs for PRGT-eligibility.However,a sample of macroeconomic indicators suggests substantial differences in vulnerabilities(see Box 5.Table 1 and Box 5.Figure 1).Tier 2B countries have historically

331、experienced the lowest growth rates of all tiers,consistent with their relatively elevated debt vulnerabilities and limited access to financing.For the same reasons,these countries primary deficits are relatively small.Statistics on international reserves of Tier 2B countries place the group closer

332、to Tier 1 countries than to Tier 2A peers.The lower proposed interest rate for Tier 2B countries compared with Tier 2A countries reflects these latent vulnerabilities.A simple average of the normalized indices(with values ranging between 0(worst)and 1(best)shows that the economic performance of Tier

333、 2B countries remains on average one-third of the distance apart from the index readings for Tier 2A.The suggested lower interest rate is consistent with these countries weaker macroeconomic conditions even if per capita income levels among Tier 2B countries are often high due to the large number of SDS in this group.Box 5.Table 1.Normalized Tier 2B indices 1/Source:IMF staff estimates.1/Calculate