African countries see merits of PSI framework
| Author | Maitland MacFarlan/John Green |
| Position | IMF African Department |
| Pages | 81-93 |
Page 81
A number of African countries are considering adopting a flexible new policy framework with the IMF that enables them to secure Fund support for, and endorsement of, their economic policies without a borrowing arrangement. Four countries in Africa-Nigeria, Uganda, Cape Verde, and most recently Tanzania-have adopted the new Policy Support Instrument (PSI), which the IMF Executive Board approved in October 2005.
Page 92
Anumber of African countries are considering adopting a flexible new policy framework with the IMF that enables them to secure Fund support for, and endorsement of, their economic policies without a borrowing arrangement.
Since the new Policy Support Instrument (PSI) was established by the IMF's Executive Board in October 2005, four countries in Africa-Nigeria, Uganda, Cape Verde, and most recently Tanzania-have adopted it.
The PSI was created to provide a support framework for low-income countries that no longer need IMF financial assistance but want Fund endorsement of their economic policies.
The PSI, which is voluntary and demand driven, is well suited to countries graduating from Poverty Reduction and Growth Facility (PRGF) arrangements. These countries-the so-called "mature stabilizers"- have made significant progress toward macroeconomic stability and debt sustainability, are well advanced in structural reforms, and have built up adequate international reserves.
Nevertheless, they may still want Fund advice and support as they continue to strengthen their growth prospects, together with their macroeconomic policy frameworks, institutions, and governance structures.
An on-track PSI may also provide the basis for rapid access to the IMF's quick-disbursing Exogenous Shocks Facility in case emergency assistance is required.
The PSI encourages countries to deepen and broaden their ownership of the policy agenda. As much as possible, policy strategies and objectives draw on domestically produced documents, including budget documentation and Poverty Reduction Strategy Papers. Nigeria's PSI, for example, is based on the National Economic Empowerment and Development Strategy, the country's homegrown poverty reduction strategy.
The authorities chose to present their policies to the Fund...
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