1 ALM Seminar Consultation on the Seventh Replenishment of IFAD’s Resources– 3 rd Session Rome, 5 July 2005

11

ALM Seminar

Consultation on the Seventh Replenishment of IFAD’s Resources– 3rd Session Rome, 5 July 2005

22

ContentContent1.1. Asset Liability Management (ALM) in IFADAsset Liability Management (ALM) in IFAD

Current and proposed definition of committable resourcesCurrent and proposed definition of committable resources

22.. Track Record of FlowsTrack Record of Flows Contributions, loan reflows, investment income, disbursementsContributions, loan reflows, investment income, disbursements

3.3. Financial ScenariosFinancial Scenarios Cash inflows and outflowsCash inflows and outflows Liquidity projectionsLiquidity projections Stress testing and financial soundness indicators Stress testing and financial soundness indicators

4.4. Comparing IFAD to IFIsComparing IFAD to IFIs Financial soundness comparisonFinancial soundness comparison Liquidity policiesLiquidity policies Use of future loan reflows and resource structureUse of future loan reflows and resource structure

5.5. ConclusionsConclusions

July 2005 – Third session of the Consultation on the 7th replenishment of IFAD’s resources

33

Content of this section:Content of this section:

Role of ALM in IFADRole of ALM in IFAD

Current and proposed definition of committable resourcesCurrent and proposed definition of committable resources

Proposed definition from legal perspectiveProposed definition from legal perspective

Section 1. Asset Liability Management (ALM) in IFADSection 1. Asset Liability Management (ALM) in IFAD

44


IFAD’s mission isIFAD’s mission is to to “Enable the Rural Poor “Enable the Rural Poor to Overcome Poverty”to Overcome Poverty”

IFAD aims to efficiently IFAD aims to efficiently maximize maximize resources availableresources available to its borrowing to its borrowing Member States while Member States while maintaining IFAD’s maintaining IFAD’s financial soundnessfinancial soundness

This goal can be better achieved through dynamic management of IFAD’s committable resources within the context of Asset Liability Management

55

Definition of committable resources:Definition of committable resources:


Current

ACA maximum 3 years of future

loan reflows

Loans Outstanding

Inst

rum

ents

of

cont

ribu

tion

rece

ivab

les

Prom

isso

ry

note

s

Cash & Investments

7th Replenishment up to 5 years of future

loan reflows

Loans Outstanding

Proposed

Inst

rum

ents

of

cont

ribu

tion

rece

ivab

les

Prom

isso

ry

note

s

Cash & Investments

Total assets

Total assets

66


Use of future loan reflows for commitments:Use of future loan reflows for commitments:

1 2 3 4 5Future reflow year

Current ACA definition

Proposed definition (but only 95% of principal, interest and net of HIPC foregone reflows)

77


Current definition: Projected 7th Repl. (2007-2009)FX rate USD/SDR 1.45

Uses

PDFF, Oper. exp.

Sources

Loan reflows 2010-2012 (ACA)*

Programme of Work (loans/grants)

HIPC

Contributions 7th

(Cash and promissory notes)

USD (2 003) M

USD (290) MUSD (137) M

Total: USD 2 240 M USD (2 430) M

USD (190) M

Contributions 6th

Shortfall

USD 800 M

USD 1 088 M

USD 32 M

USD 320 M

Internal resources 2007-2009(Inv. income, loan reflows)

*USD 320 M is based on USD 743 M (3 years future loan reflows 2010-2012) less USD 423 M (projected 6th Repl. ACA carry over)

88


Proposed definition: Projected 7th Repl (2007-2009)FX rate USD/SDR 1.45

Sources Uses

Contributions 7th

(Cash and promissory notes, Instr. of Contribution receivables)

* USD 1 100 is 5 years future loan reflows at 95% of principal, interest and net of HIPC

Internal resources 2007-2009(Inv. income, loan reflows)

Programme of Work (loans/grants)

HIPCPDFF, Oper. exp.

Future loan reflows* 2010-2014

USD (2 003) M

USD (137) M

USD (290) M

USD 3 020 M USD (2 853) M

Contributions 6th

Total:

USD 1 088 M

USD 1100 M

USD 167 M

USD 32 M

USD (423) MSurplus

Net resource position end 6th Repl

USD 800 M

99


Impact of a change in definition of committable resources:Impact of a change in definition of committable resources:

More committable resources

More loans and grants approvals

More disbursements

Lower liquidity (more reflows in the future)

Strategic liquidity management

Reallocation of assets from

investments to loans outstanding

disbursements

liquidity

1010


April’s questions on legal opinion on proposedApril’s questions on legal opinion on proposed

committable resources definition: committable resources definition: Can IOC receivables and future reflows be legally included as Can IOC receivables and future reflows be legally included as

committable resources?committable resources? Can also qualified IOCs be included in committable resources?Can also qualified IOCs be included in committable resources?

IFAD is allowed to commit against IOC receivables and future IFAD is allowed to commit against IOC receivables and future reflows on basis of the “Agreement Establishing IFAD” (Article 4, reflows on basis of the “Agreement Establishing IFAD” (Article 4, Section 1): “ the resources of the Fund shall consist of funds Section 1): “ the resources of the Fund shall consist of funds derived or derived or to be derivedto be derived from operations or otherwise accruing to from operations or otherwise accruing to the Fund”the Fund”

Qualified IOCs Qualified IOCs could be included in committable could be included in committable resources when unqualified i.e. when Members’ resources when unqualified i.e. when Members’ appropriations have been obtained and other legislative appropriations have been obtained and other legislative requirements have been metrequirements have been met

1111

Section 2. Track Record of FlowsSection 2. Track Record of Flows

April’s questions on IFAD’s financial flows:April’s questions on IFAD’s financial flows:

Have Members fulfilled their obligations against IOCs?

What is the actual track record of loan arrears?


Overview of cash flowsOverview of cash flows

Track record of flows: Track record of flows:

•ContributionsContributions

•Loan reflows and arrearsLoan reflows and arrears

•Investment incomeInvestment income

•DisbursementsDisbursements

1212


Cash inflowsCash inflows Cash outflowsCash outflows

Loan reflows (principal,interest/service charges)

Contributions

Investment income

Loan and grant disbursements

HIPC foregone reflows

Operating expenses and

PDFF

Overview of cash flows:Overview of cash flows:

1313


Track record of contributions (as at Dec 2004):Track record of contributions (as at Dec 2004):

Track record of encashments compared to deposited IOCs is record of encashments compared to deposited IOCs is almost 100%!almost 100%!

1 100

100

300

500

700

900

1st 2nd 3rd 4th 5th 6th

US

D M

Deposited IOCs

Encashed payments

Ongoing payments & encashments!

Encashment % compared to deposited IOCs (1st to 6th Repl.)

97% of IOCs

99% of IOCs

98%of IOCs

98% of IOCs

73%of IOCs

21% of IOCs

1414


Track record of loan reflows:Track record of loan reflows: In 2004, loan reflows reached the level of USD 220 M (of which In 2004, loan reflows reached the level of USD 220 M (of which

78% principal repayment and 22% interest/service charges)78% principal repayment and 22% interest/service charges)

Annual loan reflows in 1981-2004

0

50

100

150

200

250

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

US

D M

Principal Interest and service charges

78%

22%

Loan reflows have represented a stable and growing cash inflowLoan reflows have represented a stable and growing cash inflow

1515


Track record of loan arrears (of 75 days or more): Track record of loan arrears (of 75 days or more): At Dec 2004, total arrears amount USD 81 M At Dec 2004, total arrears amount USD 81 M a)a), representing 3.1%, representing 3.1%

of total amounts billedof total amounts billed 83% of arrears is concentrated in only five countries83% of arrears is concentrated in only five countries

Total amount in arrears versus total billed

0

20

40

60

80

100

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

US

D M

0.0%1.0%2.0%3.0%4.0%5.0%6.0%

7.0%

%

Arrear amount (USD M) Arrear % on total billed

Total loan arrears are very low (3.1 % of total billed) and Total loan arrears are very low (3.1 % of total billed) and

are concentrated in only few countriesare concentrated in only few countries

a) USD 12 M is covered by HIPC debt relief

1616


Grant disbursementsLoan disbursements

Annual loan and grant disbursements since 1978

0

50

100

150

200

250

300

350

1978 1981 1984 1987 1990 1993 1996 1999 2002 2004

US

D M

Track record of investment income: Stable expected return of 3.5% with current investment policy Stable expected return of 3.5% with current investment policy

Track record of disbursements: Total loan and grant disbursements reached USD 332 M in 2004Total loan and grant disbursements reached USD 332 M in 2004

1717


Summary of IFAD’s track record of flows:

The proposal to include IOCs receivables and a portion of loan reflows in the committable resources is supported by:

Excellent track record (almost 100%) of encashments Excellent track record (almost 100%) of encashments

compared to deposited IOCscompared to deposited IOCs

Stable and growing loan reflows Stable and growing loan reflows

Very low loan arrears (at 3.1% of total billed) concentrated Very low loan arrears (at 3.1% of total billed) concentrated in only few countriesin only few countries

1818

Section 3. Financial ScenariosSection 3. Financial Scenarios

April’s questions on financial scenarios:April’s questions on financial scenarios:

What are the annual, projected cash inflows and outflows for the 7What are the annual, projected cash inflows and outflows for the 7thth Replenishment and beyond? Replenishment and beyond?

What is meant by an acceptable limit of risk for liquidity? Can it be quantified?What is meant by an acceptable limit of risk for liquidity? Can it be quantified?

What are the financial indicators of the scenarios?What are the financial indicators of the scenarios?


Projections of cash inflows and outflowsProjections of cash inflows and outflows

Liquidity projectionsLiquidity projections

Stress testingStress testing

Financial soundness indicatorsFinancial soundness indicators

1919


Assumptions applied in a “Base scenario”:Assumptions applied in a “Base scenario”:

After 7th Repl. Period: neutral assumptions have been made on Replenishment and Programme of Work levels for scenario purposes only

77thth Repl. 2007-2009 Repl. 2007-2009 From 2010 From 2010

Replenishment Replenishment amountamount

USD 800 MUSD 800 MGrowth at Growth at

inflation rateinflation rate

Programme of Work Programme of Work (POW) - current (POW) - current grant policy 10%grant policy 10%

Growth at 10% p.a.Growth at 10% p.a.Growth at Growth at

inflation rate until 2015inflation rate until 2015

Committable Committable resources resources consideredconsidered

Includes IOC receivables and Includes IOC receivables and 95% of 5 years of future loan 95% of 5 years of future loan

reflows (net of HIPC)reflows (net of HIPC)

Includes IOC receivables, Includes IOC receivables, 95% of future loan reflows 95% of future loan reflows

(net of HIPC) subject to (net of HIPC) subject to sustainable liquidity sustainable liquidity

FX rate USD/SDRFX rate USD/SDR1.45 (current and 1.45 (current and

3-year-average rate)3-year-average rate)

1.45 (current and1.45 (current and

3-year-average rate)3-year-average rate)

2020


““Base scenario” compared to information in April 2005:Base scenario” compared to information in April 2005:

USD/SDR rate updated to 1.45 to reflect recent trends USD/SDR rate updated to 1.45 to reflect recent trends (Previous “Base” assumption: 1.5498 as at 31 Dec 2004)(Previous “Base” assumption: 1.5498 as at 31 Dec 2004)

Estimates of HIPC debt relief updated to most recent figures Estimates of HIPC debt relief updated to most recent figures (Estimates subject to change. HIPC contributions per Dec 2004. Previous (Estimates subject to change. HIPC contributions per Dec 2004. Previous “Base” assumption: HIPC debt relief estimates per March 2005)“Base” assumption: HIPC debt relief estimates per March 2005)

After 7After 7thth Repl. period, a “neutral” assumption about Repl. period, a “neutral” assumption about Replenishment and POW levels for scenario purposes: annual Replenishment and POW levels for scenario purposes: annual growth at inflation rate (POW growth is assumed until 2015)growth at inflation rate (POW growth is assumed until 2015)(April’s additional scenario information showed two possible trends for 8(April’s additional scenario information showed two possible trends for 8 thth Replenishment: annual POW growth of 10% or 8% in 2010-2012 and 8Replenishment: annual POW growth of 10% or 8% in 2010-2012 and 8 thth Replenishment level of USD 1 100 M or USD 1 000 M respectively)Replenishment level of USD 1 100 M or USD 1 000 M respectively)

More conservative approach in liquidity projections by applying More conservative approach in liquidity projections by applying a 3% annual reduction on all future loan reflows a 3% annual reduction on all future loan reflows

2121


-

200

400

600

800U

SD

M

Contributions 219 160 223 236 203 252 306 231 295 325 246 313

Inv. Income 109 88 80 79 77 74 73 70 67 66 62 58

Loan Reflows 220 184 193 202 211 223 236 247 260 269 280 290

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

* “Base scenario” assumptions per page 19

Projected cash inflows in assumed “Base scenario” *:Projected cash inflows in assumed “Base scenario” *:

Investment income decreasing due to gradual reallocation from Investment income decreasing due to gradual reallocation from investments to loans outstandinginvestments to loans outstanding

Annual loan reflows projected to increase some 30% by 2015 and Annual loan reflows projected to increase some 30% by 2015 and could double in 20 years (figures gross of HIPC foregone flows, could double in 20 years (figures gross of HIPC foregone flows, which are shown as expense outflows)which are shown as expense outflows)

2222


Projected cash outflows in assumed “Base scenario” *:Projected cash outflows in assumed “Base scenario” *:-

(800)

(600)

(400)

(200)

US

D M

HIPC - - (11) (42) ( 48) (48) (44) (38) (34) (28) (22) (20)

PDFF (27) (30) (30) (31) (34) (38) (40) (41) (42) (42) (43) (44)

Operating Exp. (57) (63) (69) (71) (74) (83) (84) (86) (88) (89) (91) (93)

Disbursements (332) (420) (413) (417) (423) (438) (462) (489) (515) (540) (565) (589)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


Annual disbursements projected to increase significantly in 10 years Annual disbursements projected to increase significantly in 10 years and could double in 20 yearsand could double in 20 years

2323


Projected liquidity (cash, investments) and net flows in assumed “Base Projected liquidity (cash, investments) and net flows in assumed “Base scenario”*:scenario”*:


After 2015, the “Base scenario” could reach a minimum liquidity in After 2015, the “Base scenario” could reach a minimum liquidity in 2023 (USD 1.0 B), thereafter recovering due to larger loan reflows2023 (USD 1.0 B), thereafter recovering due to larger loan reflows

Liquidity shows a gradual yet sustainable decrease (USD 1.6 B in 2015)Liquidity shows a gradual yet sustainable decrease (USD 1.6 B in 2015)

a) 2004: includes USD 91 M of movement on foreign exchange and USD -20 M of adjustmentsb) 2005: includes USD -176 M of movement on foreign exchange

Net flows 203 (257) (28) (44) (88) (58) (15) (105) (56) (40) (132) (84)

Liquidity 2560 2303 2275 2232 2143 2085 2070 1965 1909 1869 1737 1652

3 000

Liq

uid

ity

Net flo

ws

(300)

(100)

100

300

500

700

600

1 200

1 800

2 400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

b)a)

(US

D M

)

(US

D M

)

2424


Stress testing:Stress testing:

What?What? Scenarios showing the projected future impact Scenarios showing the projected future impact from changes in assumptions or from shocksfrom changes in assumptions or from shocks

Why?Why? To check adequacy of long-term liquidityTo check adequacy of long-term liquidity

How?How? By simulating the impact of stress scenarios By simulating the impact of stress scenarios relating to IFAD’s major financial flows:relating to IFAD’s major financial flows:

a)a) DisbursementsDisbursements

b)b) Encashment of contributionsEncashment of contributions

c)c) Loan reflow arrearsLoan reflow arrears

d)d) Movement on foreign exchange (overall impact)Movement on foreign exchange (overall impact)

2525


Stress scenarios: Stress scenarios:

a)a)Acceleration of loan/grant disbursements (approvals from 2005):Acceleration of loan/grant disbursements (approvals from 2005):• Loans: last 18% accelerated to disburse within 8 yearsLoans: last 18% accelerated to disburse within 8 years

• Grants: last 25% accelerated to disburse within 3 yearsGrants: last 25% accelerated to disburse within 3 years

b)b)Delayed encashment of contributions (7Delayed encashment of contributions (7thth Repl. onwards): Repl. onwards):• Encashment over 8 years from 1Encashment over 8 years from 1stst year of replenishment period year of replenishment period

(“Base” assumption: 6 years)(“Base” assumption: 6 years)

c)c)Increase in annual loan arrears (2005 onwards):Increase in annual loan arrears (2005 onwards): • From 2005, annual loan arrears at 8% (“Base” assumption: 3%)From 2005, annual loan arrears at 8% (“Base” assumption: 3%)

d)d)5% decrease in USD/SDR rate (85% decrease in USD/SDR rate (8thth Repl. onwards): Repl. onwards):• USD/SDR rate at 1.38 i.e. average rate since Jan 2001 USD/SDR rate at 1.38 i.e. average rate since Jan 2001 (“Base” assumption: 1.45)(“Base” assumption: 1.45)

Note: HIPC debt relief of 100% could represent an additional, Note: HIPC debt relief of 100% could represent an additional, future scenariofuture scenario

2626


Impact on liquidity of stress scenarios:Impact on liquidity of stress scenarios:

After 2015, all stress scenarios reach minimum liquidity After 2015, all stress scenarios reach minimum liquidity levels around 2024 and then recoverlevels around 2024 and then recover

All stress scenarios show lower yet sustainable liquidity All stress scenarios show lower yet sustainable liquidity compared to the “Base scenario” (2015: a gap of up to approx. compared to the “Base scenario” (2015: a gap of up to approx. USD 700 M)USD 700 M)

-

400

800

1 200

1 600

2 000

2 400

2 800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US

D M

693693438438166166162162-- Gap to “Base” (USD M)Gap to “Base” (USD M)

9599591 2141 2141 4861 4861 4901 4901 6521 652 Liquidity in 2015 (USD M)Liquidity in 2015 (USD M)

Accel.Accel.

disb. (a)disb. (a)

Delayed Delayed encash.(b)encash.(b)

Decrease Decrease USD/SDR rate USD/SDR rate (d)(d)

Increased Increased

arrears (c) arrears (c)

“ “BaseBase

scenario” scenario”

2727


Summary of the “Base scenario” and stress scenarios:Summary of the “Base scenario” and stress scenarios:

The assumed “Base scenario” (with 7The assumed “Base scenario” (with 7thth Repl of USD 800 M) Repl of USD 800 M) shows a gradually decreasing yet sustainable liquidity with shows a gradually decreasing yet sustainable liquidity with the proposed definition of committable resources (which the proposed definition of committable resources (which used more future reflows for commitments)used more future reflows for commitments)

Four stress scenarios show lower yet sustainable liquidity Four stress scenarios show lower yet sustainable liquidity levels; an estimated liquidity reduction of up to approx. levels; an estimated liquidity reduction of up to approx. USD 700 M by 2015 compared to “Base scenario” USD 700 M by 2015 compared to “Base scenario”

Actual materialization of stress events would call for Actual materialization of stress events would call for cautious and timely adjustments in resources and/or cautious and timely adjustments in resources and/or operationsoperations

New scenario simulations are required when there are:New scenario simulations are required when there are: changes in actual situation (“Base scenario”) changes in actual situation (“Base scenario”) risks of new stress events and/or multiple eventsrisks of new stress events and/or multiple events

2828


Indicators of financial soundness for IFAD:Indicators of financial soundness for IFAD:

With proposed definition of committable resources, liquidity:

Projection: Projection: 10 years 10 years

(2015)(2015)

37%37% 30%30% 20%20%

54%54% 65%65% 75%75%

6.26.2 3.73.7 2.32.3

0.90.9 0.60.6 0.40.4

Projection: Projection: end 7end 7thth Repl Repl

(2009)(2009)Actual:Actual:

Dec 2004Dec 2004

Loans outstandingLoans outstandingvsvs

Total assetsTotal assets

LiquidityLiquidityvsvs



Annual disbursements Annual disbursements (incl. (incl. operating exp. and PDFF)operating exp. and PDFF)


Total undisbursed balanceTotal undisbursed balance

1.

2.

decreases in favour of higher level of loans outstanding (more in line with IFAD’s mission)continues to adequately cover annual disbursements

1.

2.

Note: Liquidity takes investments (receivables and payables) into account

2929

Section 4. Comparing IFAD to IFIsSection 4. Comparing IFAD to IFIs

April’s questions on comparison to International FinancialApril’s questions on comparison to International FinancialInstitutions (IFIs):Institutions (IFIs):

How many years of future reflows do IFIs include as resources?How many years of future reflows do IFIs include as resources?

Which proportion (85%? 100%?) of annual, future loan reflows (principal and interest) do IFIs include as resources?Which proportion (85%? 100%?) of annual, future loan reflows (principal and interest) do IFIs include as resources?

Does IFAD have any resource transfer from a Bank, like IFIs?Does IFAD have any resource transfer from a Bank, like IFIs?


Financial soundness indicatorsFinancial soundness indicators

Liquidity policiesLiquidity policies

Use of future loan reflows Use of future loan reflows

Breakdown of total resources Breakdown of total resources

3030


Financial soundness indicators:Financial soundness indicators:

11%11% 16%16% 19%19% 13%13% 37%37% 30%30% 20%20%

82%82% 73%73% 72%72% 63%63% 54%54% 65%65% 75%75%

1.81.8 2.52.5 4.74.7 2.02.0 6.26.2 3.73.7 2.32.3

0.60.6 0.70.7 0.90.9 0.40.4 0.90.9 0.60.6 0.40.4

Loans outstandingLoans outstandingvsvs





Annual disburs. Annual disburs. (incl. oper. exp, PDFF)(incl. oper. exp, PDFF)


Total undisbursedTotal undisbursed

IDA2004

FSO2004

AsDF2004

AfDF2004

IFAD

Dec 2004

End 7th Repl

(2009)

In 10 years (2015)

With the proposed definition of committable resources, IFAD is still more conservative but moves closer to IFIs by the 7th Repl

Note: Liquidity takes investments (receivables and payables) into account

3131


How do IFIs define their liquidity policies (minimum liquidity)?

IDA “Percentage (set each year) of moving average of previous, current, and following year’s disbursements”

FSO “USD 500 M”

AsDF “No specific target, but minimum liquidity generated by Expanded ACA model must be no less than 20% of next year’s disbursements”

“Operational liquidity must be 50% to 75% of 3-year moving average of net disbursements”

AfDF

IFIs: generally, minimum liquidity is set as a proportion of annual disbursements. Also long-term projections are considered

IFAD: no specific liquidity target

3232


Number of future Number of future reflow yearsreflow years

% of future % of future

annual principalannual principal

% of future % of future annual interestannual interest

IFIs(IDA, FSO,

AsDF, AfDF)Unlimited subject Unlimited subject to liquidity policyto liquidity policy

From 85% to 100%:From 85% to 100%:• IDA: 95%IDA: 95%

• FSO: 100%FSO: 100%

• AsDF: 85%AsDF: 85%

• AfDF: 85%AfDF: 85%

100%*100%*

IFAD: proposal 7th Repl

77thth Repl: up to 5 Repl: up to 5 years (gradual years (gradual

increase)increase) 95%95% 95%95%

Proportion of future loan reflows included as resources:

IFAD: more conservative

IFAD: more conservative

IFAD: in line

IFAD’s proposed use of future loan reflows is in general more conservative than IFIs’ practice

* mostly earmarked for specific expenses

3333

Sample comparison of total resources to commitment level:

IDA: higher proportion of contributions transfer from parent bank (IFAD has no parent bank) future compensation for foregone reflows due to grants access to HIPC Trust Fund with the World Bank

IDA 14th Repl.

(Commitments SDR 23.7 B)

Contributions

IFAD 7th Repl. Proposal

(Commitments USD 2.0 B)

Internal resources (reflows, inv. income)

73.9%

60.0%40.0%42.2%

Incl. bank transfer

57.8%

Transfers from parent Bank

IFAD is depending more on internal resources


3434

Section 5. ConclusionsSection 5. Conclusions

An expanded definition of committable resources is proposed as a result of financial analyses. This proposed definition requires future strategic liquidity management.

Conclusions:Conclusions:

3535

Expansion of committable resources:Expansion of committable resources:

It is proposed to include IOC receivables and up to 5 years of It is proposed to include IOC receivables and up to 5 years of future loan reflows (95% of principal and interest and net of future loan reflows (95% of principal and interest and net of HIPC foregone reflows). Proposal supported by:HIPC foregone reflows). Proposal supported by:

Excellent track record of encashments compared to Excellent track record of encashments compared to deposited IOCs and stable, growing loan reflows with deposited IOCs and stable, growing loan reflows with very low arrearsvery low arrears

Long-term financial scenarios and stress scenarios Long-term financial scenarios and stress scenarios project a lower yet sustainable liquidity, which would project a lower yet sustainable liquidity, which would cover the gradually increasing disbursementscover the gradually increasing disbursements

Financial soundness indicators would remain with a Financial soundness indicators would remain with a margin of prudence and would become closer to IFIs margin of prudence and would become closer to IFIs indicatorsindicators

More strategic matching of inflows and outflows by More strategic matching of inflows and outflows by using the tools of the ALM framework (liquidity using the tools of the ALM framework (liquidity scenarios, stress testing, financial soundness scenarios, stress testing, financial soundness indicators)indicators)

Conclusions (cont’d):Conclusions (cont’d):

Section 5. ConclusionsSection 5. Conclusions

Documents

1 ALM Seminar Consultation on the Seventh Replenishment of IFAD’s Resources– 3 rd Session Rome, 5 July 2005