Policy Papers
2024
November 18, 2024
Guidance Note On The Financing Assurances And Sovereign Arrears Policies And The Fund's Role In Debt Restructurings
Description: Under its Articles of Agreement, the Fund may only provide financing to assist members to resolve their balance of payments problems and restore medium-term external viability and may only do so under adequate safeguards. The Fund’s inter-related policies on financing assurances, debt sustainability, and debt restructuring are relevant for restoring medium-term external viability. This note is designed as a reference and primer on these key sovereign debt-related Fund policies. It focuses on how to establish that a program is “fully financed” (i.e., the financing assurances policy), how to handle arrears owed by a member to its official and private creditors (i.e., the lending into arrears policies), and how to establish safeguards for continued Fund lending at the stage of program reviews (i.e., financing assurances reviews). It also provides guidance on the more general role of the Fund in debt-restructuring situations. It is the first comprehensive operational guidance on these policies, replacing the guidance previously available at the departmental level. The relevant Fund Executive Board Decisions remain the primary legal authority on matters covered in this note.
November 18, 2024
EBA-Lite 3.0 Model and Methodology
Description: The EBA-lite methodology is a key input in external sector assessments for over three-quarters of IMF member countries, representing a broad set of emerging and low-income economies. The EBA-lite methodology is refined periodically, and this paper provides a comprehensive discussion of the current EBA-lite econometric models and framework which is referred to as EBA-lite 3.0. The most recent refinements to the EBA-lite models included data updates, improved construction of model variables, and exclusion of non-robust variables. This paper also updates operational guidance on the complementary EBA-lite tools, such as the external sustainability approach and the modules for commodity exporters.
November 8, 2024
Central Bank Digital Currency: Progress And Further Considerations
Description: The paper briefs the Executive Board on the further considerations on CBDC. These cover the positioning of CBDC in the payments landscape, cyber resilience of the CBDC ecosystem, CBDC adoption, CBDC data use and privacy protection, implications for monetary policy operations, and cross-border payments with retail CBDC.
November 7, 2024
Implementing Board-Endorsed Recommendations From The 2024 External Evaluation Of The Fund’s Independent Evaluation Office (IEO)
Description: This paper describes implementation steps related to the board-endorsed recommendations from the Fourth External Evaluation of the Fund's Independent Evaluation Office (The Garcia Silva Report). The Garcia Silva Report brought recommendations in six areas to further improve the IEO’s relevance and effectiveness: (i) Undertaking Early-Stage Evaluations, (ii) Review the IEO’s HR Policy, (iii) Topic Selection, (iv) IEO Product Line, (v) Follow-up process, and (vi) Joint evaluations with other International Financial Institutions' evaluators. Recommendations (i-iv) fall under the IEO’s purview, and recommendation (vi) was not endorsed by the Executive Board. Therefore, this paper focuses on staff’s proposals to enhance the ownership in implementation and the follow-up of Board-endorsed IEO recommendations (recommendation v).
October 24, 2024
The Managing Director's Global Policy Agenda, Annual Meetings 2024: Secure A Soft Landing And Break From The Low Growth–High Debt Path
Description: The global economy has proven resilient, and a soft landing is within reach. Inflation has moderated thanks to tight monetary policy and fading supply shocks, and growth is expected to remain steady. But uncertainty remains significant, with risks tilted to the downside; medium-term growth prospects are lackluster; public debt has reached record highs and is expected to approach 100 percent of GDP by 2030; and geoeconomic fragmentation threatens to undo decades of gains from cross-border economic integration. At the same time, transformative changes—the green transition, demographic shifts, and digitalization, including artificial intelligence—are poised to reshape the global economy, creating challenges but also opportunities. Against this background, the key policy priorities are to secure a soft landing and break from the low growth-high debt path, and address other medium-term challenges. Monetary policy should ensure inflation returns durably to the target, and fiscal policy needs to decisively pivot toward consolidation to rebuild buffers and safeguard debt sustainability. Growth-enhancing reforms are urgently needed to lift growth prospects by boosting investment, job creation, and productivity. Domestic policies must be complemented by multilateral efforts to support countries with debt vulnerabilities, protect gains from economic integration, accelerate climate action, and harness benefits of new technologies while mitigating the risks. As it has done since its founding 80 years ago, the IMF will continue to adapt to serve its members with tailored policy advice, financial lifelines when needed, and capacity development. The Fund will remain a strong advocate for multilateralism and economic integration as foundations on which to build a resilient and inclusive global economy.
October 24, 2024
Progress Report to The IMFC on The Activities of The Independent Evaluation Office Of The IMF
Description: Since the 2024 Spring Meetings, the IEO finalized the evaluation on The Evolving Application of the IMF’s Mandate and launched a new evaluation on The IMF and Climate Change. The IEO has continued its progress on the ongoing evaluations of The IMF’s Exceptional Access Policy and the IMF Advice on Fiscal Policy. The IEO will develop an Evaluation Policy that addresses the recommendations of the Fourth External Evaluation of the IEO, which was concluded in July 2024.
October 22, 2024
Development Committee: The Managing Director's Written Statement
Description: The global economy has remained resilient, and a soft landing is within reach. Global growth has been resilient despite a series of shocks and is projected to remain steady, and inflation has continued to moderate, although progress is uneven across countries. However, medium-term growth prospects remain weak, with the risk for the global economy to get stuck on a low growth-high debt path. While the low-income developing countries (LIDCs) continue to recover, many remain vulnerable, with significant scarring from recent shocks. The pace of convergence toward higher living standards has slowed, making it increasingly challenging to achieve the Sustainable Development Goals (SDGs). As inflation descends and approaches targets, monetary policy must ensure that inflation expectations are well anchored while supporting growth and employment. Fiscal consolidation is necessary to rebuild buffers, fund priority investments, and ensure long-term debt sustainability. Multilateral cooperation is essential to limit the costs associated with geoeconomic fragmentation, support efforts to address debt vulnerabilities, and harness the benefits while mitigating the risks associated with the green and digital transitions.
October 21, 2024
2024 Review Of The Poverty Reduction And Growth Trust Facilities And Financing — Reform Proposals
Description: This paper reviews Poverty Reduction and Growth Trust (PRGT) facilities and financing. It proposes a comprehensive package of lending policy reforms and financing measures that aims to bolster the Fund’s capacity to support Low-Income Countries (LICs) in addressing their balance of payment needs, while restoring the self-sustainability of the Trust. The Review proposes a long-term self-sustained annual PRGT lending envelope of SDR 2.7 billion, more than double the PRGT envelope before the Covid-19 pandemic, consistent with the expected demand for Fund’s concessional financial support in the years ahead. The paper also proposes to introduce a new interest rate mechanism to better reflect the heterogeneity among LICs and focus further concessional resources to the poorest countries. These countries (currently 31 LICs) will continue to benefit from an interest-free lending under the PRGT, while other LICs will be charged a modest, and still concessional, interest rate. Additionally, the paper proposes to keep PRGT access limits at their current levels and to implement several reforms, including: reverting the PRGT access norm to the level prevailing before December 2023, streamlining and strengthening the PRGT safeguards, adjusting the PRGT eligibility and graduation framework and updating the list of PRGT-eligible countries, extending the temporarily higher cumulative access limits under the RCF until the end of December 2025, and implementing a targeted adjustment to the Policy Safeguards for High Combined Credit Exposure. On financing measures, the paper proposes to address the remaining gap in PRGT subsidy resources after accounting for the lending policy changes through (1) a further five-year suspension of PRGT administrative expenses reimbursement to the GRA and (2) a framework to deploy IMF internal resources to facilitate the generation of PRGT subsidy resources.
October 21, 2024
Initial Considerations For The Review Of Charges And The Surcharge Policy
Description:
On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.
Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.
Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.
The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.
October 21, 2024
Review Of Charges And The Surcharge Policy— A Possible Reform Package
Description:
On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.
Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.
Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.
The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.