Poverty Reduction and Growth Trust-Review of Interest Rate Structure

Policy Papers, June 26, 2019

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This paper reviews the Poverty Reduction and Growth Trust (PRGT) interest rate structure for the period July 2019–June 2021.
Since the interest rate mechanism was first established in 2009, no interest has been charged on PRGT credit.
In line with the package of reforms proposed in the parallel Review of LIC Facilities, the paper proposes to align interest rates on the SCF with those on the ECF.
Based on the average SDR rate over the most recently observed 12-month period, the proposed revised interest rate mechanism would result in zero interest rates on both ECF and SCF credit for the period July 2019–June 2021.

No interest charged on PRGT credit since the mechanism’s establishment in 2009.
Alignment proposed between SCF and ECF interest rates as part of parallel LIC Facilities reforms.
Using the average SDR rate over the most recently observed 12-month period yields zero interest for ECF and SCF credit for July 2019–June 2021.

Align interest rates on the SCF with those on the ECF under the revised PRGT interest rate mechanism for the July 2019–June 2021 period.

Subjects: Credit; Credit ratings; Financial institutions; Financial services; Loans; Money; Poverty; Poverty reduction strategy; SDR interest rate
Keywords: Credit; Credit ratings; Global; interest rate; interest rate mechanism; Loans; Poverty reduction strategy; PP; PRGT; PRGT financing; PRGT interest rate mechanism; PRGT interest rates; rate; SCF credit; SDR interest rate

Poverty Reduction and Growth Trust-Review of Interest Rate Structure, June 26, 2019