Under its Articles of Agreement, the Fund may only provide financing to assist members to resolve their balance of payments problems and restore medium-term external viability and may only do so under adequate safeguards. The Fund’s inter-related policies on financing assurances, debt sustainability, and debt restructuring are relevant for restoring medium-term external viability. This note is designed as a reference and primer on these key sovereign debt-related Fund policies. It focuses on how to establish that a program is “fully financed” (i.e., the financing assurances policy), how to handle arrears owed by a member to its official and private creditors (i.e., the lending into arrears policies), and how to establish safeguards for continued Fund lending at the stage of program reviews (i.e., financing assurances reviews). It also provides guidance on the more general role of the Fund in debt-restructuring situations. It is the first comprehensive operational guidance on these policies, replacing the guidance previously available at the departmental level. The relevant Fund Executive Board Decisions remain the primary legal authority on matters covered in this note.
- DOI
- https://doi.org/10.5089/9798400294174.007
- ISBN
- 9798400294174
- ISSN
- 2663-3493
- Issue
- 053
- Pages
- 97
- Published in
- United States of America
- Series
- Policy Paper No. 2024/053
- StockNumber
- PPEA2024053
- Volume
- 2024
Table of Contents
- Introduction 5
- Financing Assurances 7
- A. Basic Requirements 8
- B. Additional Requirements in a Pre-Emptive Restructuring Context 11
- Contributions From Official Bilateral Creditors 11
- Debt Relief from Private Creditors 13
- Special Procedures and Requirements 14
- Staff Report Requirements. 15
- SCOPE OF THE ARREARS POLICIES 16
- A. When Do the Arrears Policies Apply? 17
- Staff Report Requirements 20
- B. Which Parts of the Arrears Policies to Apply 20
- Arrears on Direct Bilateral Claims of the Official Sector 21
- Arrears to International Financial Institutions 23
- Arrears to Non-Sovereign Creditors 25
- Jurisdictional Arrears (Private-to-Private Arrears Arising Due to Exchange Restrictions) 26
- APPLYING THE ARREARS POLICIES 27
- A. Non-Toleration Policy 28
- B. Lending Into Official Arrears as Applied to Direct Bilateral Claims 29
- Strand 1: Representative Standing Forum 29
- Strand 2: Consent 32
- Strand 3: Application of the Three Criteria 33
- Strand 4: Application of Additional Safeguards 36
- C. Lending Into Official Arrears as applied to IFIs 39
- D. Lending Into Arrears Policy 40
- Restructuring Situations 40
- Principle 1: Early Dialogue between Debtor and Creditors 41
- Principle 2: Information Sharing between Debtor and Creditors 42
- Principle 3: Opportunity for Creditors to Provide Input 43
- Principle 4: Terms of the Offer 43
- Non-Restructuring Situations 44
- E. Lending Into Arrears Policy with Respect to Jurisdictional Arrears 44
- F. Application of the Arrears Policies (LIA and LIOA) in Emergency Situations 45
- FINANCING ASSURANCES REVIEWS 47
- ROLE OF THE FUND in The Debt restructuring Process 50
- A. Supporting the Authorities as they Decide Whether to Restructure 51
- B. Setting and Explaining the Envelope for A Debt Restructuring 52
- Establishing Debt Targets 53
- Representing the Restructuring in the DSA 54
- C. Promoting and Facilitating Debtor-Creditor Engagement 56
- Creditor Coordination 56
- Perimeter, Burden Sharing, and Comparability of Treatment 56
- Terms and Conditions 58
- Information Sharing 58
- Facilitating Negotiations 59
- Staff Report Requirements 60
- D. Program Conditionality 60
- E. Dealing with Fund-Related Conditions Imposed by Creditors 62
- F. Fund Communications 63
- A. Introduction 81
- B. Guiding Principles 82
- C. Information Sharing: General Guidance 83
- D. Information Sharing Through the Debt Restructuring Phases 84
- Phase One: Pre-Announcement 84
- Phase Two: Post-Announcement and Program Design, up to a Staff Level Agreement (SLA) 85
- Phase Three: Post SLA and Obtaining Assurances 86
- E. Other Information Sharing During a Debt Restructuring 87
- a. Sharing of the Full DSA 87
- b. Information Sharing in the Surveillance Context 88
- c. Information Sharing with Civil Society 89
- Appendix XII. Template Communication to Creditor Executive Director 97
