Review of the Policy Coordination Instrument and Proposal to Eliminate the Policy Support Instrument

International Monetary Fund

No 2023/040, IMF Policy Papers from International Monetary Fund

Abstract: The Policy Coordination Instrument (PCI) is a non-financial instrument, designed to help countries demonstrate their commitment to a reform agenda and unlock financing from other sources. It supports countries in designing and implementing a full-fledged macroeconomic program of policies that meet upper credit tranche standards and address imbalances, prevent crises, build buffers, and enhance stability. The PCI is available to all member countries, follows a fixed review schedule, and uses a review-based approach to monitoring conditionality. Based on a stock taking of the experience with the PCI, this review proposed reforms to ensure that the PCI remains fit-for-purpose in today’s complex global economic environment while maintaining its strong signaling function. The review also made the case for eliminating the Policy Support Instrument (PSI), which has been replaced by the PCI as the signaling instrument of choice.

Keywords: Policy Coordination Instrument (PCI); Policy Support Instrument (PSI); Stand-by Arrangement; Stand-by Credit Facility; PCI user; PCI program; SCF arrangement; PCI review schedule; PCI review; Balance of payments need; Capital inflows; Emergency assistance; Multilateral development institutions; Poverty reduction strategy; Global (search for similar items in EconPapers)
Pages: 65
Date: 2023-10-06
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