2021-07-28-IMF-Poverty_Reduction_and_Growth_Trust―2020-21_Borrowing_Agreements_with_The_Government_of_Canada_as_Represented_by_The_Minister_of_Finance,_and_The_People_s_Bank_of_China_22页_349kb

Summary of IMF Staff Report: PRGT Borrowing Agreements with Canada and China

Background

This Staff Report, dated July 12, 2021, presents new borrowing agreements for the Poverty Reduction and Growth Trust (PRGT) under the IMF's resource mobilization efforts to address the COVID-19 pandemic and economic shocks. It supplements existing PRGT resources with SDR loan commitments from Canada and China.

Context and Purpose

The agreements are finalized to increase the PRGT's borrowing capacity, allowing for expanded emergency financing to low-income countries. Previously approved increases in the cumulative borrowing limit support this resource mobilization, with the stated goal of enhancing concessional financing through innovative instruments like the Rapid Credit Facility and Rapid Financing Instrument.

Key Borrowing Agreements

• Canada: The agreement involves augmenting an existing 2017 loan agreement by SDR 500 million (total SDR 1 billion). Amendments include shifting to SDR interest rates starting July 1, 2021, due to the end of LIBOR. Other terms include a draw period until December 31, 2029, with interest payable in SDRs or other agreed media.
• China: A new Note Purchase Agreement for SDR 1 billion is established, with corresponding amendments to existing terms. Interest changes to SDR rates effective January 1, 2021, under the same reason (LIBOR termination).

PRGT Loan Enhancement Details

• The agreements add to the broader cycle of 2020-21 borrowing mobilization, with new loan resources totaling SDR 16.9 billion as of May 2021, of which SDR 15.1 billion is immediately available.
• Drawings under enhanced terms are capped at end-2029, and the agreements feature provisions for interest calculation, encashment, and claim transferability.

Key Terms and Conditions

• Denomination: Primarily SDRs, with loan operations denominated in the currency key.
• Maturity and Repayment: Notes mature based on six-month initial periods from issue, with optional six-month extensions. Principal and interest payments vary by currency and terms.
• Interest Rates: Shifted from derived LIBOR-based rates to SDR interest rates scheduled for July 1, 2021 (effective as early as January 1, 2021 under China's amendment).
• Draw Suspension and Transferability: Includes rules for suspending further drawings if payments are overdue and provisions for transferring claims within official-sector entities prior to SDR 2029.

Conclusion and Next Steps

These agreements complete the January 2021 approved borrowing limit increase, facilitating additional PRGT loan resources. Discussions on further increases may occur to extend support for countries impacted by COVID-19, under an ongoing review of concessional financing policies.