Lending

IMF financing helps member countries tackle balance of payments problems, stabilize their economies, and restore sustainable economic growth. It can also be made available in response to natural disasters and pandemics. The IMF further provides precautionary financing to countries with sound policies that may have some remaining vulnerabilities to help prevent and insure against future crises, and it continues to enhance the tools available for crisis prevention.

IMF lending has traditionally fallen into two categories: General Resources Account (GRA) loans at interest rates determined by an average of those prevailing among the world’s main currencies and loans to low-income countries on concessional terms. All loans under the IMF’s PRGT are currently provided at zero interest. With the operationalization of the RST in 2022, there is now a new third lending pillar, which encompasses a tiered interest rate structure differentiated across country groups, with low-income members benefiting from more favorable terms.

Regarding RST fundraising, the Board was informed in November 2023 of four new contribution agreements that were finalized between May and September 2023 and in April 2024 of four more contribution agreements that were finalized between October 2023 and March 15, 2024.² ³ As of April 30, 2024, there has been good fundraising progress with about SDR 34.3 billion in pledges received. Effective contribution agreements include SDR 25.4 billion in contribution packages from 16 countries, and SDR 5.6 billion in stand-alone contributions from 3 countries. Given strong and front-loaded demand for RST resources, fundraising efforts should be reinvigorated to secure additional resources. The 2023 review of RST resource adequacy indicated that reserves are adequate in the baseline and under several risk scenarios.

Following the achievement of the SDR 2.3 billion first-stage target under the July 2021 fundraising round for PRGT subsidy resources during the Annual Meetings in Marrakech, in December 2023 the IMF Executive Board approved a temporary increase in the annual access limit under the PRGT from 145 percent of quota to 200 percent of quota and a temporary increase in the cumulative access limit from 435 percent of quota to 600 percent of quota until the end of 2024. The PRGT access norms, which provide general guidance on access to PRGT facilities, and the per arrangement cap on PRGT resources under the blending policy were both also raised from 145 percent of quota to 200 percent of quota until the end of 2024. In January 2024, the IMF Executive Board approved an increase in the PRGT cumulative borrowing by SDR 3 billion from SDR 68 billion to SDR 71 billion to accommodate the better-than-expected loan mobilization outcome for additional loan pledges under the 2021 PRGT fundraising round. In FY 2024, seven PRGT lenders provided SDR 5.9 billion in new loan resources under the new PRGT borrowing agreements or by amending those that already exist.

In January 2024, the IMF staff completed an operational guidance note that aims to explain the key principles and considerations underlying the design and conditionality of IMF- supported programs. The note expanded on the previous operational guidance notes on conditionality published during 2003–14, incorporating lessons from the 2018–19 review of conditionality and other recent key policy developments, including the recommendation of the Management Implementation Plan in response to the Independent Evaluation Office’s report on growth and adjustment in IMF-supported programs. The note highlighted in particular operational advice to (1) improve real-world applications of macroeconomic forecasts in programs and foster more systematic analysis of contingency plans and risks; (2) improve the focus, depth, implementation, and tailoring of structural conditions with due consideration of growth effects; and (3) help strengthen the ownership by country authorities. Designed as a comprehensive reference and primer on program design and conditionality in an accessible and transparent manner, the note referred in summary to a broad range of economic and policy considerations over the life-cycle of IMF-supported programs.

In February 2024, the IMF Executive Board completed its review of the policy on program monitoring with Board involvement (PMB) and endorsed the proposal to keep it in the IMF’s toolkit, with a subsequent review expected in three years. The PMB was launched in October 2022 when the IMF amended its policy for staff-monitored programs to allow for program monitoring with Board involvement. As in the case of all staff-monitored programs, the objective of the PMB is to build or rebuild a track record of policy implementation toward an upper-credit-tranche-quality IMF-supported program. The PMB is carefully circumscribed for member countries under either (1) an ongoing concerted international effort by creditors or donors to provide substantial new financing or debt relief in support of the member’s policy program or (2) significant outstanding credit under emergency financing instruments at the time of a new request for such financing. It allows the Executive Board to weigh in, at the time of PMB approval, on the robustness of the member’s policies to meet the program’s objectives and, in the context of reviews, on whether it agrees with the staff that the member is on track to meet those objectives.

In March 2024, the IMF Executive Board extended the temporary increase in normal access limits under the GRA (annual and cumulative access limits from 145 and 435 percent of quota, respectively, to 200 and 600 percent of quota) until the end of 2024, instead of allowing these higher access limits to revert to their previous levels in early March 2024 as originally envisaged. The proposed extension reflects the still-high uncertain global economic environment. Importantly, it helps bridge the gap to the comprehensive review of access limits planned for the second half of 2024, which will review access limits in the context of the erosion of the nominal value of access limits against key metrics and the outcomes of the 16th General Review of Quotas.

In March 2024, the IMF Executive Board received an update on PRGT resource adequacy, including on debt relief trusts, the Catastrophe Containment and Relief Trust (CCRT), and the Heavily Indebted Poor Countries (HIPC)Initiative.

• Regarding PRGT resource adequacy, the update underscored (1) the achievement of the first-stage fundraising targets for loans (SDR 12.6 billion) and subsidy resources (SDR 2.3 billion)—loan resources raised totaled SDR 14.7 billion, exceeding the target, and SDR 2.3 billion was raised for subsidy resources; (2) continued high PRGT lending (new PRGT lending commitments reached SDR 6.3 billion in 2023, almost double the amount of 2022); and (3) higher but manageable credit risks of PRGT-eligible countries. Amid the continued high demand for PRGT lending and high SDR interest rates, the PRGT adequacy update noted a need for reforms to ensure PRGT long-term self-sustainability while meeting the financing demands of PRGT-eligible countries. The forthcoming comprehensive PRGT review will tackle this issue. Finally, the update also highlighted the need to replenish the CCRT and noted that the HIPC Initiative is nearly complete, with Somalia reaching its HIPC completion point in December 2023.
• The CCRT—the IMF’s vehicle for delivering IMF debt-service relief to its poorest members when they face qualifying events—delivered unprecedented support during the pandemic. It disbursed SDR 690 million in grants to cover debt-service relief in five tranches during the two-year period from April 14, 2020, to April 13, 2022. This debt relief benefited a total of 31 eligible countries, which are the poorest and most vulnerable IMF members, helping them free up scarce financial resources for priority spending (for example, on health) to mitigate the impact of the COVID-19 pandemic. Despite securing SDR 609.5 million in grant pledges during the pandemic, total pledges fell short of the fundraising target (SDR 1 billion) and of the total cost of the full two-year COVID-19–related debt-service relief, which required a significant drawdown of the pre-pandemic cash balance. Moreover, despite continued fundraising efforts, no new pledges have been received since December 2021. The CCRT remains, therefore, severely underfunded, with a resource balance of about SDR 78 million as of April 30, 2024. Additional grants are needed to replenish the CCRT so that it can respond to future qualifying events. The financial challenges facing the CCRT will be taken up in the next CCRT review, which is scheduled for FY 2026.
• Reflecting the difficult global environment, demand for IMF concessional financing remained high compared with pre-pandemic levels, as noted earlier.

Lending Overview

Demand for lending and support under the IMF’s precautionary facilities remained high in FY 2024. Between May 1, 2023, and April 30, 2024, new requests were approved for about SDR 53 billion, focused on the following areas:

• Building on existing lending arrangements: The IMF augmented existing arrangements to accommodate urgent new financing needs in the context of ongoing policy dialogue for an amount of SDR 5 billion. The Executive Board approved augmentation of arrangements with five members.
• New lending arrangements, including precautionary arrangements: The Executive Board approved 21 new non-precautionary IMF arrangements with 18 countries. These included 11 arrangements under the Extended Credit Facility for a total of SDR 4.73 billion, 5 under the Extended Fund Facility for a total of SDR 3.87 billion, 1 under the Stand-by Arrangement for a total of SDR 2.25 billion, and 1 under the Standby Credit Facility for a total of SDR 0.2 billion. In addition, 3 precautionary arrangements, 1 Stand-by Arrangement, and 2 FCL arrangements were made available to members.
• In addition, the Executive Board approved requests for arrangements under the Resilience and Sustainability Facility focusing on climate change from 13 countries: Benin, Cabo Verde, Cameroon, Côte d’Ivoire, Kenya, Kosovo, Mauritania, Moldova, Morocco, Niger, Paraguay, Senegal, and Seychelles (totaling about SDR 3.8 billion).
• Debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative:⁴ On December 13, 2023, the IMF Executive Board and the World Bank’s International Development Association approved Somalia’s completion point under the enhanced HIPC Initiative.⁵ At the completion point, Somalia received full debt relief in the amount of SDR 250.43 million.⁶ Sudan’s prospects for reaching its HIPC completion point remain uncertain. The IMF-supported program for Sudan that was approved in June 2021 expired in December 2022. A new PRGT arrangement would be needed to support progress toward reaching the HIPC completion point.⁷