The IMF announced early October a new programme called the Policy Monitoring Arrangement (PMA) “which would be available to countries with sound policies that don’t want to borrow from the IMF but see a benefit to frequent IMF statements to donors, creditors and the general public about the strength of their economic and financial policies”.
This programme is seen as a possible successor to the Contingent Credit Lines (CCL) set up in 1999 which expired last year. CCL offered funds to countries with sound economic policies that were at risk of financial contagion from countries in crisis. There was a lack of interest because countries feared participation would be seen as a sign of weakness. Fund instruments for monitoring and signalling include staff-monitored programmes, assessment letters, and various forms of surveillance.
Some IMF board members were less than enthusiastic about the proposed PMA programme, citing problems with past Fund surveillance programmes. They urged staff to further ascertain the programme’s potential demand and utility.
G24 ministers questioned the benefits of creating an instrument for signalling purposes, expressing fear that it would damage lending to low income countries: “While the instrument has been presented as ‘voluntary,’ there is a high probability that it would in fact become a requirement for lending, grants, and debt relief”.
Many directors feared the instrument would not be used by borrower countries given its stringent conditions and the absence of automatic access to Fund resources.
According to the Fund, the PMA could complement staff visits and the annual Article IV consultations (in-country consultations between Fund and officials assessing the overall state of the economy)
Staff are considering issues raised by the board for incorporation into a paper on ‘signalling’ due in February.