The Executive Board of the International Monetary Fund (IMF) considered a series of papers to reform the Fund's nonconcessional lending framework. This culminated in the approval of a major overhaul of the IMF’s lending framework, including the creation of a new Flexible Credit Line (FCL). The changes to the IMF’s lending framework which are described in GRA Lending Toolkit and Conditionality—Reform Proposalsand GRA Lending Toolkit and Conditionality—Reform Proposals—Revised Proposed Decisions include: • modernizing IMF conditionality for all borrowers, • introducing a new Flexible Credit Line, • enhancing the flexibility of the Fund’s traditional stand-by arrangement, • doubling normal access limits for nonconessional resources, • simplifying cost and maturity structures, and • eliminating certain seldom-used facilities. The series of papers are: Review of Fund Facilities—Analytical Basis for Fund Lending and Reform Options, Conditionality in fund-Supported Programs—Purposes, Modalities and Options for Reform, Charges and Maturities and Proposals for Reform, Supplement 1 and Supplement 2, Review of Fund Facilities—Analytical Basis for Fund Lending and Reform Options, and Review of Limits on Access to Financing in the Credit Tranches and Under the Extended Fund Facility, and Overall Access Limits Under the General Resources Account provide the background on the earlier discussion of reforms in each of these areas.

In connection with its recent review of the GRA Lending Toolkit and Conditionality—Reform Proposals, the Executive Board decided that the Fund would move to a review-based approach to monitor the implementation of structural reforms in the context of Fund-supported programs, including under PRGF or ESF arrangements.

This paper examines the implications of the Fund accepting membership in the Financial Stability Board (“FSB”). The FSB Charter (the ?Charter?) explicitly contemplates the possibility of the Fund and the other international financial institutions becoming members but notes that ?the acceptance of membership by the international financial institutions (IFIs) in the FSB is subject to the approval of their respective governing bodies.? An Executive Board decision is required for the Fund to accept membership and is proposed below.

This paper takes a fresh look at the purpose and modalities of conditionality for the use of the Fund’s resources. It is part of a broader review of Fund lending facilities that includes access levels, charges and maturities, the analytical basis for Fund lending, and facilities for low income countries. It aims to explore options for more flexible approaches that would be responsive to the changing needs and circumstances of the Fund’s members while providing adequate safeguards for Fund resources. While these options have been developed with General Resources Account (GRA) facilities in mind as a complement to the companion paper on the analytical framework, they could apply, as appropriate, to facilities and instruments used by low income members.

This volume is the Forty-First Issue of Selected Decisions and Selected Documents of the IMF. It includes decisions, interpretations, and resolutions of the Executive Board and the Board of Governors of the IMF, as well as selected documents, to which frequent reference is made in the current activities of the IMF. In addition, it includes certain documents relating to the IMF, the United Nations, and other international organizations. As with other recent issues, the number of decisions in force continues to increase, with the decision format tending to be longer given the use of summings up in lieu of formal decisions. Accordingly, it has become necessary to delete certain decisions that were included in earlier issues, that is, those that only completed or called for reviews of decisions, those that lapsed, and those that were superseded by more recent decisions. Wherever reference is made in these decisions and documents to a provision of the IMF’s Articles of Agreement or Rules and Regulations that has subsequently been renumbered by, or because of, the Second Amendment of the Fund’s Articles of Agreement (effective April 1, 1978), the corresponding provision currently in effect is cited in a footnote.

This paper discusses Poland’s Arrangement Under the Flexible Credit Line (FCL) and Cancellation of the Current Arrangement. The FCL arrangements since 2009 have served Poland well, providing valuable insurance against external shocks. With the support of the consecutive FCL arrangements, Poland has weathered bouts of market turbulence well, and remains an attractive investment destination. The authorities intend to continue treating the FCL as precautionary and consider it a temporary supplement to reserves. In IMF staff’s view, Poland continues to meet the qualification criteria for continued access to the FCL.

This paper discusses Mexico’s Arrangement Under the Flexible Credit Line (FCL) and Cancellation of Current Arrangement. Mexico continues to face significant uncertainty regarding the pace and outcome of the negotiations on the North American Free Trade Agreement. The authorities are requesting a two-year precautionary FCL arrangement and the cancellation of the current arrangement, approved on May 27, 2016. They consider that, in an environment where external risks affecting Mexico remain elevated, an FCL arrangement in the requested amount will play a critical role in supporting their overall macroeconomic strategy, preserving investor confidence, and providing insurance against tail risks. The IMF staff supports the authorities’ request.

This volume documents decisions, interpretations, and resolutions of the Executive Board and Board of Governors of the International Monetary Fund, as well as documents relating to the United Nations and other international organizations.

"This note provides general guidance on the use of the Flexible Credit Line (FCL). After an overview of the instrument, explaining its specific nature, the operational issues are grouped into three areas: • an outline of the process and specific steps that need to be followed if a member expresses interest in an arrangement; • guidance on determining qualification of a member; and • a how-to guide for determining appropriate access levels. The note is an aid to the implementation of the policy and its underlying principles. If there is any instance in which a provision of the guidance note or its implementation conflicts with Board policy, Board policy prevails. It will be revised as needed, for example following relevant policy reviews."

Precautionary balances are a key element of the Fund’s multilayered framework to mitigate financial risks. Overall financial risks remain elevated but have not increased significantly since the last review. Staff proposes to leave the medium-term target of SDR 25 billion, and the minimum floor of SDR 15 billion, unchanged at this time. With the projected increase in lending income, the pace of reserve accumulation is expected to remain adequate relative to the medium-term indicative target. The paper also reviews policy factors discussed in recent Board meetings that affect the level and accumulation of reserves.