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Background: As a follow-up to the May 2013 Executive Board’s discussion of the paper on Sovereign Debt Restructuring: Recent Developments and Implications for the Fund’s Legal and Policy Framework (hereinafter, the “2013 Paper“), this paper proposes a reform to the Fund’s policy on non-toleration of arrears owed to official bilateral creditors (“NTP”) with a view to addressing the major issues related to official sector involvement (OSI) discussed in the 2013 Paper. Unlike the Fund’s lending-into-arrears (“LIA”) policy for private creditors, the NTP prevents Fund lending to countries if they owe unresolved arrears to official bilateral creditors, unless the arrears are covered by a Paris Club agreement or the creditor consents to the Fund providing financing. Nature of the problem: As staff foreshadowed in the 2013 Paper, several aspects of the current NTP present challenges in a changing and increasingly diverse landscape for official bilateral finance. For example, the NTP’s reliance on the practices and conventions of the Paris Club creates challenges in an environment where a growing number of creditors are non-Paris Club members. In particular, the NTP’s dependence on the Paris Club’s comparability of treatment principle to deem away arrears to non-Paris Club bilateral creditors is difficult to justify in circumstances where a Paris Club agreement is not sufficiently representative and the bulk of official bilateral claims are held by non-Paris Club creditors. Further, where there is no Paris Club agreement, the current policy can give individual official bilateral creditors a veto over Fund lending decisions, drawing no distinction between creditors that are contributing to the financing requirements of the program and those that are not, thus leaving the system vulnerable to holdouts. Proposed modification: Staff’s proposal envisages a two-step process: in the first step, all creditors would be encouraged to reach a consensus. While the Paris Club is currently a well-established forum for OSI, the Fund would also recognize agreements among creditors reached in other representative fora, should such fora emerge. If an agreement is reached through the Paris Club and the creditor group so formed represents a significant portion of total official bilateral claims, the Fund would rely on its current practices and deem away arrears to nonparticipating creditors based on the Club’s comparability of treatment principle. Only when an agreement cannot be reached (i) with a representative group of creditors in the Paris Club, or (ii) with each creditor in an alternative grouping or bilaterally, would the Fund consider lending into arrears owed to official bilateral creditors in carefully circumscribed circumstances. The decision to lend in these situations would be subject to a need for prompt Fund assistance, an assessment that the debtor is making good faith efforts to reach an agreement and that the absence of a debt restructuring is due to the unwillingness of the creditor to reach an agreement consistent with the parameters of the Fund-supported program, and a judgment on whether the decision to lend could negatively affect the Fund’s ability to mobilize official financing packages in the future. Likely impact: Staff’s proposal will strengthen incentives for collective action among official bilateral creditors in situations where OSI is necessary. The two-step process encourages individual official bilateral creditors to be part of a multilateral agreement, thus reducing the risk that the Fund would be prevented from assisting a member in need because certain official bilateral creditors are seeking more favorable treatment of their claims at the expense of other contributing creditors. Importantly, the policy will continue to protect official bilateral creditors, as any decision to lend into arrears will be subject to the debtor’s good faith efforts, will be applied in a way that preserves the Fund’s ability to mobilize official financing packages in future, and be subject to the Board’s approval. Next steps: If the Board supports the proposed modification, the new policy will apply immediately to all future Fund disbursements (including under existing arrangements) with respect to existing and future arrears owed to official bilateral creditors.
This paper undertakes a comprehensive review of the Fund’s sovereign arrears policies. Staff assesses that the Fund’s Lending into Arrears to Private Creditors (LIA) policy (established in 1989 and last reviewed in 2002) remains broadly appropriate, while recommending some improvements given the experience gained over the last 20 years. Staff also sees merit in codifying the existing practice guiding the Fund in preemptive debt restructurings into a Fund policy, together with an amendment focusing on debt transparency. Given limited experience with the application of the LIOA policy (established in 2015), staff does not propose any amendments but only one restatement confirming current practice. Given recent developments in the international creditor community, staff proposes refining the Fund’s arrears policies with respect to multilateral creditors. Finally, recent developments raise questions about the perimeter between official bilateral and private claims, with significant implications for the Fund’s arrears policies.
In discussing the June 2014 paper, Executive Directors broadly supported staff’s proposal to introduce more flexibility into the Fund’s exceptional access framework to reduce unnecessary costs for the member, its creditors, and the overall system. Directors’ views varied on staff’s proposal to eliminate the systemic exemption introduced in 2010. Many Directors favored removing the exemption but some others preferred to retain it and requested staff to consult further with relevant stakeholders on possible approaches to managing contagion. This paper offers specific proposals on how the Fund’s policy framework could be changed, presents staff’s analysis on the specific issue of managing contagion, and addresses some implementation issues. No Board decision is proposed at this stage. The paper is consistent with the Executive Board’s May 2013 endorsement of a work program focused on strengthening market-based approaches to resolving sovereign debt crises.
This note aims to provide guidance on the key principles and considerations underlying the design of Fund-supported programs. The note expands on the previous operational guidance notes on conditionality published over 2003-2014, incorporating lessons from the 2018-19 Review of Conditionality, and other recent key policy developments including the recommendation of the Management’s Implementation Plan in response to Independent Evaluation Office (IEO)’s report on growth and adjustment in IMF-supported programs. The note in particular highlights operational advice to (i) improve the realism of macroeconomic forecast in programs and fostering a more systematic analysis of contingency plans and risks; (ii) improve the focus, depth, implementation, and tailoring of structural conditions (SCs), with due consideration of growth effects; and (iii) help strengthen the ownership of country authorities. Designed as a comprehensive reference and primer on program design and conditionality in an accessible and transparent manner, the note refers in summary to a broad range of economic and policy considerations over the lifecycle of Fund-supported programs. As with all guidance notes, the relevant IMF Executive Board Decisions remain the primary legal authority on matters covered in this note.
This volume is the Fortieth Issue of Selected Decisions and Selected Documents of the IMF. It includes decisions, interpretations, and resolutions of the Executive Board and the Board of Governors of the IMF, as well as selected documents, to which frequent reference is made in the current activities of the IMF. In addition, it includes certain documents relating to the IMF, the United Nations, and other international organizations. As with other recent issues, the number of decisions in force continues to increase, with the decision format tending to be longer given the use of summings up in lieu of formal decisions. Accordingly, it has become necessary to delete certain decisions that were included in earlier issues, that is, those that only completed or called for reviews of decisions, those that lapsed, and those that were superseded by more recent decisions. Wherever reference is made in these decisions and documents to a provision of the IMF’s Articles of Agreement or Rules and Regulations that has subsequently been renumbered by, or because of, the Second Amendment of the Fund’s Articles of Agreement (effective April 1, 1978), the corresponding provision currently in effect is cited in a footnote.
This is a high-level report on progress in addressing recurring issues identified by the Independent Evaluation Office (IEO). The Board endorsed the proposal in the Chairman’s Summing Up for the Independent Evaluation Office Report on Recurring Issues from a Decade of Evaluation – Lessons for the IMF (BUFF/14/58, 6/11/14) that staff prepare a separate high-level report on the status of initiatives that address the recurring issues identified by the IEO, noting that the first staff report could be prepared within two years, followed by similar reports every five years thereafter. The September 2015 Management Implementation Plan set out the actions management would take to follow-up on the Board-endorsed recommendation. The IEO’s 2014 evaluation of Recurring Issues from a Decade of Evaluation: Lessons for the IMF identified five recurring issues: a) Executive Board guidance and oversight; b) Organizational silos; c) Attention to risks and uncertainty; d) Country and institutional context; and e) Evenhandedness. This high-level report provides a broad account of actions taken to address these recurring issues since the publication of the 2014 IEO report; it is not intended as an exhaustive account of initiatives undertaken. Takeaways. The report concludes that the Fund has made progress in addressing the recurring issues identified by the IEO, and acknowledges the need for taking actions on an ongoing basis to achieve the related objectives. The discussion of the Management Implementation Plan (MIP) left open the question of whether subsequent reports should be prepared, perhaps every five years. The Evaluation Committee concluded that the forthcoming external evaluation of the IEO could look at the monitoring mechanisms more holistically, to provide further input into considering whether or not to continue the preparation every five years of this high-level report.
The book sheds light on the perhaps most important legal conundrum in the context of sovereign debt restructuring: the holdout creditor problem. Absent an international bankruptcy regime for sovereigns, holdout creditors may delay or even thwart the efficient resolution of sovereign debt crises by leveraging contractual provisions and, in an increasing number of cases, by seeking to enforce a debt claim against the sovereign in courts or international tribunals. Following an introduction to sovereign debt and its restructuring, the book provides the first comprehensive analysis of the holdout creditor problem in the context of the two largest sovereign debt restructuring operations in history: the Argentine restructurings of 2005 and 2010 and the 2012 Greek private sector involvement. By reviewing numerous lawsuits and arbitral proceedings initiated against Argentina and Greece across a dozen different jurisdictions, it distils the organizing principles for ongoing and future cases of sovereign debt restructuring and litigation. It highlights the different approaches judges and arbitrators have adopted when dealing with holdout creditors, ranging from the denial of their contractual right to repayment on human rights grounds to leveraging the international financial infrastructure to coerce governments into meeting holdouts’ demands. To this end, it zooms in on the role the governing law plays in sovereign debt restructurings, revisits the contemporary view on sovereign immunity from suit and enforcement in the international debt context, and examines how creditor rights are balanced with the sovereign’s interest in achieving debt sustainability. Finally, it advances a new genealogy of holdouts, distinguishing between official and private sector holdouts and discussing how the proliferation of new types of uncooperative creditors may affect the sovereign debt architecture going forward. While the book is aimed at practitioners and scholars dealing with sovereign debt and its restructuring, it should also provide the general reader with the understanding of the key legal issues facing countries in debt distress. Moreover, by weaving economic, financial, and political considerations into its analysis of holdout creditor litigation and arbitration, the book also speaks to policymakers without a legal background engaged in the field of international finance and economics.
This Handbook provides guidance to staff on the IMF’s concessional financial facilities and non-financial instruments for low-income countries (LICs), defined here as all countries eligible to obtain concessional financing from the Fund. It updates the previous version of the Handbook that was published in December 2017 (IMF, 2017e) by incorporating modifications resulting from the 2018–19 Review of Facilities for Low-Income Countries and Review of the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries (IMF, 2019a, b), approved by the Board in May 2019; the reforms introduced in 2021 on the basis of the Board paper Fund Concessional Financial Support for Low-Income Countries—Responding to the Pandemic (IMF, 2021a), approved in July 2021; and a number of other recent Board papers. Designed as a comprehensive reference tool for program work on LICs, the Handbook also refers, in summary form, to a range of relevant policies that apply more generally to IMF members. As with all guidance notes, the relevant IMF Executive Board decisions including the terms of the various LIC Trust Instruments that have been adopted by the Board, remain the primary legal authority on the matters covered in the Handbook.
The last time global sovereign debt reached the level seen today was at the end of the Second World War, and this shaped a generation of economic policymaking. International institutions were transformed, country policies were often draconian and distortive, and many crises ensued. By the early 1970s, when debt fell back to pre-war levels, the world was radically different. It is likely that changes of a similar magnitude -for better and for worse - will play out over coming decades. Sovereign Debt: A Guide for Economists and Practitioners is an attempt to build some structure around the issues of sovereign debt to help guide economists, practitioners and policymakers through this complicated, but not intractable, subject. Sovereign Debt brings together some of the world's leading researchers and specialists in sovereign debt to cover a range of sub-disciplines within this vast topic. It explores debt management with debt sustainability; debt reduction policies with crisis prevention policies; and the history with the conjuncture. It is a foundation text for all those interested in sovereign debt, with a particular focus real world examples and issues.
This paper discusses Zimbabwe’s Settlement of Overdue Financial Obligations to the Poverty Reduction and Growth Trust (PRGT), Lifting of Declaration of Noncooperation, Lifting of Restriction on IMF technical assistance, and restoration of PRGT eligibility. In light of Zimbabwe’s settlement of its overdue financial obligations to the PRGT, the IMF staff proposes that the Board remove the remaining remedial measures. Zimbabwe is eligible to return to the PRGT-eligibility list. The IMF staff also proposes that the Board lift the declaration of noncooperation, remove the remaining restriction on the provision of IMF technical assistance, and reinstate Zimbabwe as a PRGT-eligible country.