The Acting Chair’s Summing Up— Eligibility to Use the Fund’s Facilities for Concessional Financing, 2019, Executive Board Meeting 20/18, February 19, 2020

Executive Directors welcomed the opportunity to review the PRGT eligibility framework and the associated list of PRGT-eligible countries, and to consider staff’s proposals for refining the framework. They emphasized that PRGT eligibility should continue to be guided by a framework that is transparent and rules-based, ensures uniformity of treatment among members, and preserves the Fund’s scarce concessional resources for the use of low-income members that are in most need, while maintaining the self-sustainability of PRGT lending. Directors reiterated that the eligibility framework should remain broadly aligned with International Development Association (IDA) practice, while allowing scope for some differences given the different mandates of the two institutions.

Directors concurred that the existing framework remains broadly appropriate while generally supporting the proposed refinements to improve the assessment of market access, and the extension of the transition period before graduation decisions become effective. They underscored the importance of a robust communication strategy and early engagement with countries that may be graduation candidates in upcoming reviews, to ensure a smooth transition process.

Directors agreed that for the purpose of assessing past market access borrowing from international financial markets below 2 percent of quota in any given year should not count as market access in evaluating the durability requirement for both graduation from and entry into PRGT eligibility. They also supported the proposed clarifications to the definition of commercial borrowing, which would generally exclude borrowing by public corporations on the basis of their own balance sheets and without sovereign guarantees, and would also exclude borrowing that is guaranteed or subsidized by an official external entity and loans from foreign state-owned banks. In this context, some Directors stressed the importance of debt transparency.

Directors broadly supported the proposed modifications related to database use, confirming that the IDS database will be the primary data source used to assess past market access. They agreed that use of this data source will simplify data sourcing, improve data accuracy, and enhance evenhandedness by ensuring that the same five-year period is used to assess market access in all member countries. Directors welcomed the clarifications with respect to the assessment of whether a country “could have tapped” international markets on a durable and substantial basis, even though the scale or duration of actual borrowing fell short of the specified thresholds for past market access. They emphasized the need to follow the “could have tapped” principle in an evenhanded manner across the membership, taking into account-country specificities.

Directors concurred that the proposed modifications for assessing market access in the PRGT eligibility framework should also apply to assessments of past market access under the PRGT’s blending and exceptional access frameworks. These modifications consist of (i) the use of one primary data source to assess past market access, (ii) the exclusion of de minimis borrowing below 2 percent of quota from indicating market access in that year, and (iii) the clarifications to the definition of commercial borrowing.

Directors welcomed the proposed clarifications with respect to how serious short-term vulnerabilities are assessed. They noted the importance of paying attention to risks stemming from climate change, natural disasters, structural weaknesses, and social unrest in making such assessments, giving due consideration to both historical and forward-looking indicators of risk. Directors also considered it important to ensure that the assessment of vulnerabilities yields consistent outcomes to avoid premature graduation.

Directors generally agreed with the extension of the transition period for the deferred effectiveness of graduation decisions from three to five months to allow adequate time to conclude any ongoing discussions on and obtain Board approval for PRGT financing or support under the Policy Support Instrument (PSI). Directors supported the proposed graduation of Guyana from PRGT eligibility, noting that its graduation is a positive and welcome step signaling Guyana’s sustained progress in achieving higher levels of income.

Directors agreed that other members that currently meet the income and/or market access criteria face serious short-term vulnerabilities that preclude graduation from PRGT eligibility during this review.

Directors concurred that no non-eligible members are currently eligible for entry onto the list of PRGT-eligible countries. Directors agreed that the next review of PRGT eligibility would be held on the standard two-year cycle.

SU/20/26,

February 21, 2020