The Chair’s Summing Up—Review of the Cumulative Access Limits Under the Rapid Financing Instrument and the Rapid Credit Facility; Review of Experience with the Food Shock Window Under the Rapid Financing Instrument and the Rapid Credit Facility Executive Board Meeting 23/52, June 27, 2023

Executive Directors welcomed the opportunity to review (i) the temporarily higher cumulative access limits under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) and (ii) the experience with the Food Shock Window (FSW) under the RFI and the RCF. They broadly supported a limited extension of the temporarily higher cumulative access limits under the RFI and RCF, and a six-month extension—until end March 2024—of the FSW.

Directors welcomed the strong transition from pandemic-related emergency financing under the RCF and the RFI to upper credit tranche (UCT) quality programs since 2021. They considered that the past two years have demonstrated that the qualification requirements for RCF and RFI financing ensure that these instruments are only used when a UCT-quality program is either not feasible or not necessary. At the same time, Directors considered that the continued challenging global economic environment, which has left many countries with depleted macroeconomic buffers, calls for maintaining some borrowing space under the Fund’s emergency financing instruments.

Directors noted that many countries that used the RFI and/or the RCF during the pandemic would be left with little or no borrowing space under these emergency financing instruments if their cumulative access limits were to return to pre-pandemic levels at the end of June 2023. Against this backdrop, most Directors supported an extension of the temporarily higher cumulative access limits for the RFI (150 percent of quota for the regular window and 183.33 percent of quota for the Large Natural Disaster (LND) window) until the end of June 2024; with a few of these Directors noting that they would have preferred an even longer extension, while another view raised concerns about the extension’s potential impact on countries’ transition to UCT-quality programs. Directors also supported extending the temporarily higher cumulative access limits for the RCF (150 percent of quota for the exogeneous shock window and 183.33 percent of quota for the LND window) until the date of the Board completion of the comprehensive review of the Poverty Reduction and Growth Trust (PRGT) facilities planned for 2024/25. Directors noted that these temporary extensions in cumulative access limits for the RFI and RCF will enable the Fund to continue to provide support to members that experience urgent Balance of Payment needs where a UCT-quality program is not feasible or not necessary.

Directors welcomed the opportunity to discuss the Fund’s response to the global food shock and the experience with the FSW that was established in September 2022 for a period of 12 months. They agreed that the food shock is still ongoing, and that the Fund should continue its effort to support countries, working with partners. While noting that the Fund should endeavor to deliver financial support through UCT-quality program in most cases, they broadly agreed that it would be prudent to extend the availability of the FSW as a contingency tool to support members strongly affected by the ongoing food shock in situations where a UCT-quality program is not feasible or not necessary. Directors concurred that extending the availability of the window would also allow a longer period for observing demand developments and provide confidence that the window could then lapse without limiting the Fund’s ability to support its members.

Against this backdrop, Directors supported extending the availability of the FSW under the RFI and the RCF for an additional 6 months—until March 31, 2024. Most Directors preferred the FSW to automatically expire at that time unless demand developments warrant another Board discussion before such date. A number of Directors requested, however, that the Executive Board decide on the FSW’s expiration rather than letting it elapse automatically. A few other Directors would have preferred extending the FSW for a longer period, whereas another view favored a shorter extension.

Directors also agreed to extend the application of an additional 25 percent of quota to cumulative access limits until end-2026 for countries that have accessed the FSW through the RFI, and until the completion of the comprehensive review of PRGT facilities planned for 2024/25 for those countries that have received FSW support under the RCF. A number of Directors emphasized that RCF-eligible countries should not be placed at a disadvantage as an outcome of the different timelines and the PRGT facilities review. Many Directors reiterated their support for the combination of a FSW with a Staff Monitored Program or a Program Monitoring with Board Involvement, which can help countries building a track record of policy implementation. A number of Directors also highlighted that appropriate governance safeguards for FSW financing, tailored to country circumstances, remain essential to ensure transparency and accountability in the spending of these emergency resources. Directors called for effectively communicating the Fund's role and policies to address the global food shock, and in particular the role of the FSW.

Many Directors noted the limited uptake of the FSW relative to their initial expectation and expressed concerns on potential evenhandedness issues. Some Directors also considered that the design of the FSW may not have sufficiently reflected the full range of circumstances of all eligible countries. In this context, a few Directors called for an ex-post evaluation of the FSW experience after the expiration of the window.

Directors noted staff’s assessment that the further temporary extension of the higher cumulative access limits for emergency financing instruments and the extension of the FSW would have a limited impact on the General Resources Account and PRGT resources. Some Directors considered that concluding the 16th General Review of Quotas with a quota increase would help ensure members’ access to adequate Fund financing.

SU/23/102,

June 29, 2023