IMF Reforms Policy for Exceptional Access Lending

IMF lending decisions will be better calibrated to countries’ debt vulnerabilities

Reforms to reduce costs of sovereign debt crises for the member, its creditors, and overall system

Part of wider IMF work program to efficiently resolve sovereign debt crises

The broad objectives of the reform—which includes the removal of the “systemic exemption” that was created in 2010—is to help promote more efficient resolution of sovereign debt problems and avoid unnecessary costs for the member, its creditors, and the overall system.

“This latest reform to our lending framework is actually part of a broader reform agenda aimed at more efficiently resolving sovereign debt crises where they occur, as well as to prevent their occurrence in the first place,” said Sean Hagan, the IMF’s General Counsel.

“The reform is carefully designed to preserve the IMF’s ability to continue to provide financing to assist members in resolving their balance of payments problems, including in the presence of contagion risks,” said Hugh Bredenkamp, Deputy Director of the Strategy, Policy and Review Department of the IMF.

Evolution of the “exceptional access” framework

In the late 1990s and early 2000s, the IMF provided financing to a number of its members that were experiencing capital account crises which, on several occasions, involved “exceptional access” to IMF resources—that is, financing amounts that exceeded normal IMF lending limits. The requirements in place at the time to justify these large-scale lending programs were “exceptional circumstances,” and these were not clearly defined. This left the IMF vulnerable to pressure to provide large amounts of funding even when prospects for program success were not as strong as should have been for the level of risk the IMF was assuming.

To address these concerns, the IMF established a comprehensive exceptional access policy framework in 2002. Under this framework, the IMF could only provide large-scale financing in capital account crisis if all of four conditions were met, one of which was that there is a “high probability” that the member country’s debt is sustainable. This is the second exceptional access criterion.

The other three exceptional access “criteria” (as they are known as) relate to a member experiencing exceptionally large balance of payments needs; the member having prospects for gaining/regaining access to private capital markets; and the member having the institutional and political capacity and commitment to implement a IMF-supported program.

With respect...