Public Information Notice No. 08/30

Public Information Notice: IMF Executive Board Concludes 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

March 7, 2008

On February 22, 2008, the Executive Board of the International Monetary Fund (IMF) concluded its review of access policy.

Background

The Executive Board of the IMF periodically reviews the access policy, that is the rules and practices that govern the amount of financing the Fund makes available to its members in support of their economic program. This review includes consideration of the limits applying to the use of resources available in the credit tranches (normally under Stand-By Arrangements) and the Extended Fund Facility (EFF) as well as the conditions and circumstances that may lead to lending beyond the limits, as set out in the Fund's exceptional access framework. The review also considers the policies for lending under the Poverty Reduction and Growth Facility (PRGF), under which the Fund makes concessional loans to its low-income members.

Executive Board Assessment

Executive Directors welcomed the opportunity to review the Fund's access policy in the credit tranches and under the EFF and the PRGF, and the exceptional access policy. Today's discussion took place against a backdrop of historically low demand by members for the Fund's general resources, but Directors recognized the challenging and uncertain environment, with strains in financial markets and heightened downside risks, weighing on the short-term prospects of the global economy. Directors were of the view that many members' policy responses and fundamentals remain, by and large, strong. They nevertheless called on staff to watch developments closely, noting that the Fund's liquidity position remains sufficiently strong, enabling it to respond, if needed, to a range of shocks that may affect the membership.

Most Directors agreed that the guidelines and limits underlying the Fund's access policy—including the access limits in the credit tranches and under the EFF, the separate global limits that apply across all General Resources Account (GRA) facilities and policies, and the criteria for access in individual cases—remain appropriate. While some Directors saw the need for increasing the access limits, as resources available to some dynamic members have not kept pace with the trade and capital flows in an increasingly globalized world, most Directors supported maintaining the current limits. In this context, some Directors noted that the quota and voice reforms should result in quota increases for many of the Fund's most dynamic members, which could go some way in closing the gap between their quotas and their relative weight in the global economy. A number of Directors also noted that the development of a new liquidity instrument would help in crisis prevention, and could in turn lower the need for members to draw on Fund resources. Several Directors suggested that quotas are not an appropriate metric on which to base access to Fund resources and thought that alternative metrics could be explored. Directors also reaffirmed that in individual arrangements, access decisions within the limits should continue to be guided by the member's need for financing, its capacity to repay its obligations to the Fund, including the strength of its adjustment program, and the amount of its outstanding use of Fund resources.

Directors considered that the current limits provide an important threshold defining exceptional access, beyond which access decisions are subject to greater scrutiny. Overall, most Directors considered that the exceptional access framework, including the four substantive criteria and the strengthened procedures, remains broadly appropriate and believed that no changes to the existing framework are needed at this time. Some Directors stressed in this regard that the strengthened procedures under the exceptional access framework—such as early Board involvement and transparency—and the higher burden of proof are important financial safeguard mechanisms. A few Directors referred to the Fund's preferred creditor status and questioned the need for strengthened safeguards. Most Directors also agreed that it is appropriate to apply the substantive criteria more flexibly in non-capital account crisis cases. Some Directors, however, called for clarification of the rules governing exceptional access in those cases, noting that the frequency of these cases has increased since the substantive criteria were agreed.

Most Directors considered that current access limits and norms in the PRGF remain appropriate to ensure the efficient use of the limited PRGF resources. Directors stressed that the PRGF remains a key instrument for macroeconomic policy support in low income countries. Some Directors, however, noted that progress in strengthening macroeconomic frameworks and implementing structural reforms has increased the demand for low-access PRGF arrangements and for Policy Support Instruments as a signaling device.

Most Directors also agreed that the next review of access policy will take place by February 21, 2013 as scheduled, or earlier if suggested by the circumstances. Factual updates will continue to be provided to the Board on an annual basis. Directors noted that access policy is linked to broader Fund policy issues such as charges and maturities, including surcharges, quotas and voice reform, and the possible establishment of a new liquidity instrument. They stressed the importance of making progress on these broader issues, and, in light of these discussions, a number of Directors felt that the next review of access policy should take place earlier than scheduled. A number of Directors called for an early completion of the review of charges and maturities.