This note is based on the article <span style="color:#0047AB;">Joshi, S., & Vidyasagar, P. S. S. (2025, March). Role of Regional Financing Arrangements (RFAs) [section in Market access and IMF arrangements: Evidence from across the globe]. RBI Bulletin, March 2025. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23262) | [[RBI_Article_20250319_Market Access and IMF Arrangements- Evidence from Across the Globe_Shruti Joshi and PSS Vidyasagar.pdf|pdf]]</span> 1. In times of crisis, the followings options are used by the countries to meet BoP financing needs 1. forex reserves 2. swaps - both bilateral and from RFAs (multilateral) 3. market borrowings by pledging gold holdings 4. borrowing against reserve tranche 5. transfer of SDR holdings to capital-rich member of IMF 2. Those countries without or limited market access and alternative resources avail IMF loans. 3. This points to the role of the IMF as the global lender of last resort for countries with acute balance of payments pressures due to its near universal membership and resource size, and highlights its central role in the GFSN. ## Borrowing Countries 1. Advanced Economies (AEs/ADEs) have not borrowed since 2014, barring the exceptional case of GFC-Eurozone crisis, where some AEs (Greece, Ireland, Portugal, Cyprus) availed extraordinarily large amounts of loans from the IMF. 2. A host of EMDEs rely on borrowings from IMF known as IMF loan arrangements or IMF Programs. These countries have deteriorating external funding/liquidity positions due to weak macroeconomic fundamentals, 1. such as higher current account deficit, 2. low international reserves, 3. high fiscal deficit, 4. low per capita income, and 5. exchange rate imbalances, 3. This weakness is also visible in indicators such as the import cover of forex reserves, the share of short-term debt, debt service ratio, etc. 4. Their vulnerability can be exacerbated, in the form of restricted access to market through increased CRPs, by global factors or shock events such as 1. global business cycle, 2. a steep rise in international commodity prices and 3. world interest rates (monetary policy decisions in major advanced economies) *(Bird and Orne, 1986; Cornelieus, 1987; Joyce, 1992; Bird and Rowlands, 2002; Joyce, 2004; Elekdag, 2008).* 4. and the increased global interconnectedness which accelerates the transmission of global spillovers resulting in external financing problem of such countries. Hence IMF borrowing, particularly for the LICs and some EMDEs, has been in conjunction with rising economic integration across the globe 5. Some of these global events are: 1. The global recession of 1983 1. It was triggered by oil shock and a subsequent debt crisis in Latin America, many EMDEs, especially in Latin America and Sub-Saharan Africa (SSA), suffered long-lasting slowdown in growth (Kose et al., 2020). 2. As a result, IMF stepped up its lending programs during 1982-83 to these regions. Around 85 per cent of the Fund lending in 1983 was to Latin America and SSA. 2. The Gulf war 1. 50 per cent of the lending in 1991 was to the Asia-Pacific Region (APR) which was affected adversely by the increased crude price 3. 2007-2009 Global financial Crisis (GFC) 4. [European Sovereign Debt/Eurozone/Euro Area crisis](https://www.elibrary.imf.org/display/book/9781475562538/ch005.xml) (2010-2015) 1. Greece, Ireland, Portugal, and Cyprus received IMF support 5. [COVID crisis](https://www.imf.org/en/about/faq/imf-response-to-covid-19) 6. Region-wise Borrowing from IMF 1. In terms of number of arrangements as well as quantum of loans under GRA, the Western Hemisphere Region (WHR[5](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23262#FN5)) - predominantly Latin America - is the largest borrower 2. SSA [(Sub-Saharan Africa)](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23262#FN6) is the largest borrower from PRGT 3. Moreover, some countries within WHR, SSA and APR[7](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23262#FN7) have repeatedly borrowed from the IMF. ## IMF loans 1. There are [multiple](https://www.brettonwoodsproject.org/2020/10/what-types-of-financing-does-the-imf-provide/) windows [to borrow from IMF](https://www.imf.org/en/data/imf-finances#LendingAtaGlance). 2. The access to [IMF loans](https://www.imf.org/en/about/factsheets/imf-lending) is determined by members’ quotas, with the loan quantum typically being a multiple of the quota. [^] 3. There are three broad types of support: ^e937e8 4. Of the three types, two are loans and one is member’s unconditional drawing right on the IMF. 1. ==Non-concessional arrangements (loans under GRA/GRA purchases)== 1. These are loans at market-based interest rates which, although potentially lower than market rates may still be unappealing because of the performance conditions and the associated stigma (Kawai, 2010). 2. They come under the General Resources Account (GRA). 3. Examples - Stand-By Arrangement (SBA), 1. Extended Fund Facility (EFF), 2. Flexible Credit Line [(FCL)](https://www.imf.org/en/about/factsheets/sheets/2023/flexible-credit-line-fcl) 3. precautionary and liquidity line [(PLL)](https://www.imf.org/en/about/factsheets/sheets/2023/precautionary-liquidity-line-pll) replacing  Precautionary Credit Line (PCL) 4. FCL and PCL also serve the certification of robust macroeconomic fundamentals from IMF, thereby enhancing market access for countries. 4. Outright loan - Rapid Financing Instrument [(RFI)](https://www.imf.org/en/about/factsheets/sheets/2023/rapid-financing-instrument-rfi) under GRA 1. Outright loans (one-time disbursements) and are not part of multi-year arrangements. 2. An outright loan is also approved by the IMF Executive Board, however, *it does not require a member to observe specific terms*. 2. ==Concessional arrangements (loans under PRGT and RST)== 1. These are loans at low or zero interest rates, and are for low-income countries, and are provided through dedicated trusts like: 1. Poverty Reduction and Growth Trust [(PRGT)](https://www.imf.org/en/about/faq/prgt-review) 1. Outright loan - Rapid Credit Facility (RCF) under PRGT 2. Resilience and Sustainability Trust (RST) provided for climate & structural reforms. 3. Both concessional and non-concessional arrangements, other than the outright loans, require the member to observe specific terms and subject to periodic reviews in order to continue to draw upon it. 4. Here is the link to the [total IMF Credit](https://www.imf.org/external/np/fin/tad/extcred1.aspx) Outstanding for all members from 1984 - 2025 5. ==Quota-based resources (outright loans against member's country own reserves which is reserve tranche)== 1. Countries pay roughly around 25% of their quota in foreign currency (or SDR) and rest 75% in domestic currency. This 25% is the reserve tranche 2. This is the [link](https://www.imf.org/external/np/fin/tad/exfin2.aspx?memberkey1=430&date1key=2025-11-30) to [India's](http://www.imf.org/external/country/IND/index.htm) financial position in the IMF. 3. The reserve tranche amount is initially created by the *reserve-asset (foreign exchange, SDRs, gold-until 1978) portion (normally 25%)* of a country’s quota subscription. Thus India does not pay in INR. 4. It is the most liquid and unconditional line of credit with the IMF. Here unconditional means that a member can draw on its reserve tranche position [[WSS - Weekly Forex Reserves#1.4 Reserve Tranche Position (RTP) at IMF|(RTP)]] at any time without having to agree to policy conditionality. In other words, this amount is a no-strings-attached emergency fund for balance of payments needs. 5. There is no interest on these withdrawals. 6. A borrowing member country has to only submit a declaration of balance of payments-related needs. IMF does not challenge a member’s request for reserve tranche purchases. 7. Convertible currencies from a reserve tranche purchase may be made available within days. 8. It is part of country's foreign-exchange reserves 9. RTP of India rises when IMF holds less (through sale) of INR 1. This happens when India repays its borrowing using convertible foreign currency or IMF uses India’s currency to finance another country's BoP needs. 10. RTP of India falls when IMF holds more (through repurchase) of INR 1. This happens when India borrows (draws foreign currency) or when IMF repurchases INR as some country repays using India’s currency. ## India's stand in the IMF 1. India repaid its loans to IMF in [1993](https://www.imf.org/external/np/fin/tad/extarr2.aspx?memberKey1=430&date1key=2025-11-30) 1. India availed assistance from IMF in 1981 for an Extended Fund Facility, and then again in 1991 2. Rather before 1992-93, India had serious balance of payments issues. It relied on IMF periodically. Before the liberalisation process started from 1992-93, India relied heavily on multilateral (like IMF) and bilateral assistance, ECBs (to some extent) and NRI deposits, to finance the CAD. 2. [Press release](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2127998&lang=2&reg=3) issued by the Ministry of Finance, Government of India on 9 May 2025 explaining India’s official position on a recent International Monetary Fund (IMF) lending decision regarding Pakistan ## Alternatives to IMF Loans for BoP needs 1. Countries with relatively stronger macro-economic positions now have more options besides IMF to meet external funding needs like 1. market borrowing like LoCs and swaps with increased access to international capital markets 2. Currency swap arrangements [[Bilateral, Multilateral Swaps, LoC, Liquidity Arrangements#^172062|(bilateral-2 parties)]] 3. RFAs (Regional Financing Arrangements) ([[Bilateral, Multilateral Swaps, LoC, Liquidity Arrangements|multilateral swap lines-reserve pools of multiple nations)]] But most of the low income countries (LICs) and some EMDEs cannot rely on these alternatives because of poor or non-existent sovereign credit ratings. 4. Reserve-currency issuing AEs also don't rely on IMF as their own central bank can provide limitless domestic liquidity 1. [EU-BoP facility](https://economy-finance.ec.europa.eu/eu-financial-assistance/non-euro-area-countries/balance-payments-bop-assistance-facility_en) for EU countries outside the euro area (non-eurozone countries) 2. [EFSF](https://www.esm.europa.eu/about-us/efsf/before-the-esm) - the temporary fiscal backstop (2010-12) for Greece, Portugal and Ireland 3. In 2012 post the Eurozone crisis, the [European Stability Mechanism](https://www.esm.europa.eu/financial-assistance/lending-toolkit) - the  euro area’s permanent bailout fund 5. IMF also [collaborates](https://www.imf.org/-/media/files/publications/pp/2017/pp073117-collaboration-between-regional-financing-arrangements-and-the-imf.pdf) with RFAs to coordinate their lending programs when the crisis is large. [^1] ## References 1. IMF. (July 2017). _Collaboration between regional financing arrangements and the IMF_ (IMF Policy Paper No. PP/17/11). IMF. [Link](https://www.imf.org/-/media/files/publications/pp/2017/pp073117-collaboration-between-regional-financing-arrangements-and-the-imf.pdf) 2. C. Randall Henning. (2020). _Regional financial arrangements and the International Monetary Fund: Sustaining coherence in global financial governance_ (Special Report). CIGI (Centre for International Governance Innovation). [Link](https://www.cigionline.org/static/documents/documents/RFAs%20and%20the%20IMF%20web_1.pdf) | [[CIGI_2020_Regional financial arrangements and the International Monetary Fund- Sustaining coherence in global financial governance_ Special Report.pdf|pdf]] 3. Srinivas, V. (2020). _India’s relations with the International Monetary Fund (IMF): 25 years in perspective 1991–2016_ \[Book\]. VIJ Books India Pvt. Ltd; Indian Council of World Affairs | [[Book_2020_V. Srinivas_India’s relations with the International Monetary Fund (IMF)- 25 years in perspective 1991–2016.pdf|pdf]] 4. <span style="background-color:#fefaf3;">Joshi, S., & Vidyasagar, P. S. S. (2025, March). _Role of Regional Financing Arrangements (RFAs)_ [Section in _Market access and IMF arrangements: Evidence from across the globe_]. _RBI Bulletin_, March 2025. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23262) | [[RBI_Article_20250319_Market Access and IMF Arrangements- Evidence from Across the Globe_Shruti Joshi and PSS Vidyasagar.pdf|pdf]]</span> ## Related Notes 1. [[Bilateral, Multilateral Swaps, LoC, Liquidity Arrangements]] 2. [[Forex - Devaluation of Egyptian Pound in 2016]] [^1]: C. Randall Henning. (2020). _Regional financial arrangements and the International Monetary Fund: Sustaining coherence in global financial governance_ (Special Report). CIGI (Centre for International Governance Innovation). [Link](https://www.cigionline.org/static/documents/documents/RFAs%20and%20the%20IMF%20web_1.pdf) | [[CIGI_2020_Regional financial arrangements and the International Monetary Fund- Sustaining coherence in global financial governance_ Special Report.pdf|pdf]]