Guidance Note On The Financing Assurances And Sovereign Arrears Policies And The Fund's Role In Debt Restructurings

Under its Articles of Agreement, the Fund may only provide financing to assist members to resolve their balance of payments problems and restore medium-term external viability and may only do so under adequate safeguards. The Fund’s inter-related policies on financing assurances, debt sustainability, and debt restructuring are relevant for restoring medium-term external viability. This note is designed as a reference and primer on these key sovereign debt-related Fund policies. It focuses on how to establish that a program is “fully financed” (i.e., the financing assurances policy), how to handle arrears owed by a member to its official and private creditors (i.e., the lending into arrears policies), and how to establish safeguards for continued Fund lending at the stage of program reviews (i.e., financing assurances reviews). It also provides guidance on the more general role of the Fund in debt-restructuring situations. It is the first comprehensive operational guidance on these policies, replacing the guidance previously available at the departmental level. The relevant Fund Executive Board Decisions remain the primary legal authority on matters covered in this note.