Policy Reform Proposals To Promote The Fund’s Capacity To Support Countries Undertaking Debt Restructuring

APRIL2024 IMFPOLICYPAPER POLICYREFORMPROPOSALSTOPROMOTETHEFUND’SCAPACITYTOSUPPORTCOUNTRIESUNDERTAKINGDEBTRESTRUCTURING IMFstaffregularlyproducespapersproposingnewIMFpolicies,exploringoptionsforreform,orreviewingexistingIMFpoliciesandoperations.Thefollowingdocumentshavebeenreleasedandareincludedinthispackage: APressReleasesummarizingtheviewsoftheExecutiveBoardasexpressedduringitsApril9,2024considerationofthestaffreport. TheStaffReport,preparedbyIMFstaffandcompletedonMarch15,2024fortheExecutiveBoard’sconsiderationonApril9,2024. [Thedocumentslistedbelowhavebeenorwillbeseparatelyreleased.] TheIMF’stransparencypolicyallowsforthedeletionofmarket-sensitiveinformationandprematuredisclosureoftheauthorities’policyintentionsinpublishedstaffreportsandotherdocuments. ElectroniccopiesofIMFPolicyPapersareavailabletothepublicfrom http://www.imf.org/external/pp/ppindex.aspx InternationalMonetaryFundWashington,D.C. ©20[xx]InternationalMonetaryFund PR24/119 IMFExecutiveBoardEndorsesReformstoPromotetheIMF’sCapacitytoSupportCountriesUndertakingDebtRestructurings FORIMMEDIATERELEASE Washington,DC–April9,2024:TheExecutiveBoardoftheInternationalMonetaryFund(IMF)endorsedtodaytherecommendationsoftheIMFstaffpaper“PolicyReformProposalstoPromotetheFund’sCapacitytoSupportCountriesUndertakingDebtRestructurings.”ThereformsaredesignedtoensureamoreagileapproachtoIMFsupporttocountriesundertakingdebtrestructuringwhilemaintainingadequatesafeguardsforIMFfinancingandreinforcingtheexistingarchitecturefordebtresolution. AnumberofrecentIMF-supportedprogramsinvolvingdebtrestructuringsexperiencedsignificantdelaysfromthetimeStaffLevelAgreementwasreacheduntilthetimethenecessaryofficialcreditorassuranceswereprovidedtoallowtheapprovalofIMFfinancing. Therehasbeenamarkedimprovementlatelyandcasesaremovingforwardmorequickly,withsubstantialprogressincollaborationamongofficialbilateralcreditors.Forexample,whileittookChad11monthstomovefromaStaff-LevelAgreementwiththeIMFstafftosecurethecreditorassurancesneededforapprovalofIMFfinancing;ittookZambia9monthstoreachthismilestone,SriLanka6months,andGhana5months.Butmoreprogressisneeded. Thestaffpaperdrawslessonsfromthisexperienceandproposesasetofreformsinfiveareas,whichshouldensureasmootherandspeedierprocessinthefuture: (i)clarifyingwhenandhowtoapplyadditionalsafeguardsunderIMF’sfinancingintoofficialarrearspolicy,whichshouldhelpavoiddelaysatthisstage; (ii)strengtheningtheeffectivenessandbroadeningtheapplicabilityoffinancingassurancesreviewswhenthereisanongoingdebtrestructuring,tobetterencourageadequateprogresswiththerestructuring; (iii)establishingamorerobustandagileapproachforderivingfinancingassurancesfromofficialbilateralcreditors(basedonsupportingandobservingtheirprocesses)withtheaimtoestablishtheseassurancesmorerapidly; (iv)adjustingtheIMF’sApproval-in-PrincipleproceduressothattheycanbeusedtoprovideamodalityforIMFengagementwiththememberuntilfinancingassurancesareestablishedforIMFfinancing;and (v)clarifyinghowtheIMFcanprovidesupporttomembersfacingarrearstoofficialcreditorswhentheyalsofaceanemergencysituation,likeanaturaldisaster. Thereformsaredesignedtosupporttheexistingarchitecturefordebtresolution,preservingandcomplementingwhatworkswellwhileaddressingtimegapsthatcanbecreatedbyIMFrequirementsandenhancinginformationflows.Thereformsrecognizedifferentofficialcreditorprocessesandprovidearobustframeworktosupporttheirparticipationinrestructuringson 2 termsconsistentwithrestoringdebtsustainability.Thereformsarealsoconsistentwithdifferentsequencingofofficialandprivaterestructurings(althoughthischoiceremainswiththedebtorandcreditors).FortheIMF,thereformsareoverallexpectedtopromotemoreagileengagementwhilemaintainingadequatesafeguards. ExecutiveBoardAssessment1 1.DirectorswelcomedtheopportunitytoconsiderreformstopromotetheFund’scapacitytosupportcountriesundertakingdebtrestructurings.Directorsagreedthat,notwithstandingsubstantialprogressinrecentcases,theFund’sabilitytoassistmembersinresolvingtheirbalanceofpaymentsproblemsmaystillbeconstrained.Directors,therefore,appreciatedtheopportunitytoconsidercertainpolicyreformstobetterreflectthecurrentcontext.DirectorsagreedthattheproposalsendorsedtodayareaccuratelyreflectedintheExecutiveBoardunderstandingsinSupplement3ofSM/24/65tobeissuedshortly. Strands1,2and3undertheLIOA 2.DirectorsagreedthattheLendingIntoOfficialArrears(LIOA)policyremainsbroadlyappropriateandthatthecurrentguidanceonapplicationofthefirst,second,andthirdstrandsofthepolicyshouldberetained.MostDirectorsagreedthatStrand1—creditorcoordinationthrougharepresentativestandingforumsuchastheParisClubortheCommonFrameworkinvolvingtheParisClub—shouldremainthecentralfocusoftheLIOApolicyandshouldbeusedwheneveritisorbecomesavailable.AfewDirectorsstressedtheurgencyofrecognizingtheG20CommonFrameworkmoregenerallyasarepresentativestandingforum.Directorsalsoreiteratedthat,consistentwithitscurrentpolicy,theFundwouldnormallynotapplyStrand3(i.e.,thethreecriteria)toacreditororagroupofcreditorswithanadequatelyrepresentativeshareoftotalf