Review Of Access Policy In The Credit Tranches And Under The Extended Fund Facility And The Poverty Reduction And Growth Facility And Exceptional Access Policy

Section I of this paper contains a discussion of the purpose of access rules, and Section II examines the Fund’s liquidity position. Section III discusses the potential demand for Fund resources resulting from several possible shocks. Section IV considers recent trends in access decisions and evaluates how they have conformed to the principles underlying the access rules, and whether the Fund’s liquidity would be a constraint to providing similar access in the period ahead. Section V summarizes recent developments in exceptional access and discusses issues pertinent to policy in such cases. Section VI concludes with the list of staff recommendations and the issues for discussion. Draft decisions on access to GRA and PRGF resources are provided in Section VII.

This paper reviews the Fund’s access policy under its main financing facilities in the General Resources Account (GRA) and under the Poverty Reduction and Growth Facility (PRGF). It responds to the Board’s request for a periodic review of the access policy, that is, the rules and practices that govern the amount of financing the Fund makes available to its members.

Scope and strategy: This paper reviews access limits and surcharge policies in the Fund’s General Resources Account (GRA). It builds on the preliminary Executive Board discussion that took place in May 2014, against the backdrop of the 14th Review quotas expected to become effective early in 2016, which will on average double individual members’ quotas. At the meeting in 2014, most Directors considered that a moderate increase in normal access limits in SDR terms would broadly restore the normal Fund access to levels considered acceptable in 2009, and saw merit in adjusting the surcharge threshold to allow for a moderate increase in the SDR value of credit not subject to the charge.

We review the impact of the global financial crisis, and its spillovers into the sovereign sector of the euro area, on the international “rules of the game” for dealing with sovereign debt crises. These rules rest on two main pillars. The most important is the IMF’s lending framework (policies, financing facilities, and financial resources), which is designed to support macroeconomic adjustment packages based on the key notion of public debt sustainability. The complementary pillar is represented by such contractual provisions as Collective Action Clauses (CACs) in sovereign bonds, which aim to facilitate coordination among private creditors in order to contain the costs of a debt default or restructuring. We analyze the most significant changes (and their consequences) prompted by the recent crises to the Fund’s lending framework, not only in terms of additional financial resources, new financing facilities (including precautionary ones), and cooperation with euro-area institutions, but also as regards the criteria governing exceptional access to the Fund’s financial resources. We highlight a crucial innovation to these criteria, namely that, for the first time, they now explicitly take account of the risk of international systemic spillovers. Finally, we discuss how the recent crises have provided new political support for a broader dissemination of CACs in euro-area sovereign bonds. Importantly, in the first case involving an advanced economy, CACs were activated in the debt exchange undertaken by Greece in Spring 2012.

The Board completed its last review of access policy in February 2008 (2008 Access Policy Review). At that time, while some Directors saw the need for an increase in the limits on normal access to Fund resources, most Directors supported maintaining the access limits in the credit tranches and under the Extended Fund Facility (EFF) and the separate overall limits on access to resources in the General Resources Account (GRA) at the present level of 100 percent of quota on an annual basis and 300 percent on a cumulative basis. During the 2008 Spring Meetings, the International Monetary and Financial Committee (IMFC) encouraged the Executive Board to consider raising access limits. In doing so, the IMFC recognized that emerging market and developing countries are not immune to a broadening of the problems in financial markets and looked forward to reviewing progress at its next meeting. A fresh look at access limits is warranted in light of the broader review of the Fund’s lending framework which is underway, and to take account of the April 28, 2008 agreement on a second round of ad hoc quota increases under the quota and voice reform.

In the context of a relatively benign international environment with limited balance of payments needs, recourse to Fund resources has declined across several dimensions: fewer GRA arrangements; lower outstanding Fund resources; and a smaller average access under new PRGF arrangements.

The Fund’s decisions to lend to member countries in amounts well above the access limits for Mexico (1995), and since then, have raised important questions about the role of the Fund in crisis resolution and the appropriate size of Fund access in capital account crises. This paper reviews past experience in exceptional access cases and considers strengthened conditions, procedures and safeguards for guiding decisions on Fund programs in these exceptional circumstances where Fund financing above normal access limits may be appropriate.

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