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

Abstract

The Policy Coordination Instrument (PCI) is a non-financial instrument designed to help countries demonstrate commitment to a reform agenda and unlock financing from other sources. Established in 2017, the PCI aims to support countries in designing and implementing a full-fledged macroeconomic program of policies to address imbalances, prevent crises, build buffers, and enhance stability. The PCI enables closer cooperation with the Fund in cases where countries commit to upper-credit tranche (UCT) quality policies and more intensive monitoring. However, at the time of requesting a PCI, such countries must not be seeking financial assistance from the General Resources Account (GRA) and the Poverty Reduction and Growth Trust (PRGT). The design, request, and review process of the PCI are structured based on Fund arrangements, with several design features drawing on the Policy Support Instrument (PSI). Similar to the PSI, the PCI is a form of technical assistance. However, unlike the PSI, which is restricted to PRGT-eligible members, the PCI is available to all member countries.