EN ECB -PUBLIC  
OPINION OF THE EUROPEAN CENTRAL BANK  
of 28 December 2021 
on Italy’s participation in the International Monetary Fund programmes: Poverty Reduction and 
Growth Trust and debt relief for Sudan  
(CON/20 21/39) 
Introduction and legal basis  
On 13 December 2021, the European Central Bank (ECB) received a request from the Italian Ministry of 
Economy and Finance for an opinion on draft legislative provisions (hereinafter the ‘draft legislative 
provisions ’) included in the Italian Law on the budget for the year 2022 and for the multi -year period 
2022-24 (hereinafter the ‘2022 Law on the budget ’). The 2022 Law on the budget must be approved by the 
end of December 202 1. 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third indent of Article  2(1) of Council Decision 98/415/EC1, as 
the draft legislative provisions  relate to the Banca  d’Italia. In accordance with the first sentence of Article 17.5 
of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
1. P
urpose of the draft legislative provisions
1.1 Background c ontext
The draft legislative provisions make provision for new arrangements in relation to the Poverty 
Reduction and Growth Trust (PRGT)  between Italy and the International Monetary Fund ( IMF), first 
in the form of loan agreements and, second, in the form of donations . The renegotiation of the loan 
and donation arrangements under the PRGT is part of the IMF’s effort to support global liquidity, 
especially in the poorest countries, in the light of the changing global environment arising from the 
economic and social consequences of the COVID -19 pandemic2. The draft legislative provi sions also 
aim at providing reimbursement to the Banca d’Italia of a sum equal to the resources of the Banca 
d’Italia  used for the Italian share of participation in the Heavily Indebted Poor Countries (HIPC) 
initiative in favour of Sudan. The draft legislative provisions are accompanied by an explanatory 
memorandum and a t echnical report (‘ relazione tecnica’)3 which provide additional operational and 
timing details on these arrangements.  
1 Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
2 See paragraph 9 of the explanatory memorandum.  
3 Under Italian law, the draft laws submitted to the Parliament by the Government are accompanied by a technical report, 
which must describe the financial burden of any provision.  
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2 1.2 New contribution to the PRGT  in the form of a loan agreement  
The draft legislative provisions authorise the Banca d’Italia to enter into a new loan agreement to 
contribute to the IMF’s PRGT, for an amount of 1 billion special drawing rights ( SDR ). The new loan 
agreement is in addition to the existing PRGT loan s of 400 million  and 1 billion  SDR4. The draft 
legislative provisions further provide for a State guarantee to the Banca d’Italia in respect of the 
reimbursement of principal and interest due on the new PRGT loan5. 
1.3 New contribution to the PRGT  in the form of subsidies  
In addition, the draft legislative provisions authorise the Banca d’Italia to provide subsidies, in the form of donations, to the PRGT, for an amount up to EUR 101 million, equivalent to 83 million SDR , 
over a period of five years starting from 2022. The draft legislative provisions, read in conjunction with 
the explanatory memorandum and technical report , further provide for the pre- funding by the Ministry 
of Economy  and Finance of the subsidies to be made to the PRGT by the Banca d’Italia
6.  
1.4 Participation in the HIPC  initiative  in favour of Sudan  
The draft legislative provisions authori se the Ministry of Econom y and Finance to reimburse the Banca 
d’Italia the sum of  EUR 49 million, equivalent to the amount of 40 ,46 million SDR. The sum was paid 
by the Banca d’Italia on 29 June 2021,  in connection with the Italian share of participation in the HIPC 
initiative in favour of Sudan . The reimbursement will be made in 2022, with the value date  set at the 
date of payment made by the Banca d’Italia  (i.e. 29 June 2021) . According to the explanatory 
memorandum, the reimbursement is intended to comply with the prohibition of monetary financ ing as 
set out in Article 123(1)  of the Treaty7. 
 
2. Monetary financing prohibition  
2.1 Article 123(1)  of the Treaty prohibits the national central banks (NCBs) from granting overdraft 
facilities or any other type of credit facility to public authorities and bodies of the Member States . This 
prohibition is however  subject to certain exemptions contained in Council Regulation (EC) 
No 3603/938. In particular, Article 7 of Regulation (EC) No 3603/93 provides that the financing by 
NCBs of obligations falling upon the public sector vis -à-vis the IMF is not regarded as a credit facility 
within the meaning of Article 123 of the Treaty. The fourteenth r ecital of Regulation (EC) No  3603/93 
clarifies the rationale behind this exemption, stating that it is appropriate to authorise the financing by 
the NCBs of obligations falling upon the public sector vis -à-vis the IMF because such financing ‘results 
 
4  Currently, Italy’s participation in the PRGT is regulated by Article 16(6- sexies ) of the Decree Law on the extension of 
deadlines, of 30 December 2016, No 244, converted by the Law of 27 February 2017, No 19 and by Article 1(638) of 
Law No  178 of 30 December 2020. See Opinions CON/2011/10, CON/2017/4 and CON/2020/37. All ECB opinions are 
published on EUR -Lex. 
5  The draft legislative provisions specify that any charges stemming from the abovementioned guarantee shall be 
covered by the payment to the State budget of the amounts available in the special accounts referred to in Article  8(4) 
of Decree -Law No 201 of 6 December 2011, converted, with amendments, into Law No 214 of 22  December  2011, and 
the subsequent reallocation to the releva nt chapters of the Italian Ministry of Econom y and Finance’s budget.  
6  Article 127(3) of the draft legislative provisions provides that a special fund with a yearly endowment shall be allocated to the budget of the Italian Ministry of Econom y and Finance,  ‘in order to comply with the applicable national and 
European legislative provisions’. Paragraph 11 of the explanatory memorandum  and the note on Article  127(3) of the 
draft legislative provisions contained in the technical report both clarify that such amounts are to be transferred in 
advance, in full, to the Banca d’Italia by the Italian Ministry of Econom y and Finance.
 
7  See paragraph 13 of the explanatory memorandum.  
8  Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions 
referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1).  
ECB -PUBLIC  
3 in foreign claims which hav e all the characteristics of reserve assets’. Therefore, the exemption in 
Article 7 of Regulation (EC) No 3603/93 must be interpreted in line with this rationale9. 
2.2 Reserve assets have been defined as those external assets that are readily available to and controlled 
by monetary authorities for meeting balance of payments financing needs, for interventions in 
exchange markets to affect the currency exchange rate, and for other related purposes, such as 
maintaining confidence in the currency and the economy,  and serving as a basis for foreign borrowing. 
Under this definition , reserve assets must be foreign currency assets and, other than gold bullion, 
must be claims on non- residents10. The need for availability on demand to meet balance of payments 
financing needs and other related purposes  implies  that the credit quality and liquidity  of the claims  
must be ensured.  
2.3 The ECB understands that the draft legislative provisions are accompanied by, and must be read in 
conjunction with the explanatory memorandum and technical report which provide additional 
operational and timing details on these arrangements. These documents provide an interpretation o f 
how the draft legislative provisions must be under stood.  
Contribution to the PRGT  in the form of a  loan  
2.4 For the exemption laid down in Article 7 of Regulation (EC) No 3603/93 to apply to the new PRGT 
loan envisaged by the draft legislative provisions, the terms and conditions of the agreement with the 
IMF must provide for a potential  early repayment of the principal amount of the borrowed resources . 
Under this  arrangement , the SDRs channelled by the Banca d’Italia to the PRGT would be readily 
repayable,  to meet balance of payments and reserve needs, so that the  liquidity of the claims of  the 
Banca d’Italia  is safeguarded with a view to ensuring their reserve asset status . 
2.5 Subject to the above arrangement, t he ECB considers that the B anca d’Italia’s additional loan to the 
IMF’s PRGT set out in the draft legislative provisions  is compatible with the monetary financing 
prohibition,  as it results in SDR -denominated claims of the B anca d’Italia against an IMF -administered 
trust that have all the character istics of reserve assets11. 
Contribution to the PRGT  in the form of subsidies  
2.6 With regard to the new PRGT subsidies  envisaged by the draft legislative provisions , the ECB 
understands that they are pre-funded  by the Ministry of Economy  and Finance, such that t he 
contribution to the PRGT subsidy resources is  in fact  not financed by the Banca d’Italia. The Banca 
d’Italia  is only executing the transfer of funds on the Ministry ’s behalf. In such case, the transfer of 
funds to the IMF by the Banca d’Italia  would not give rise to a credit facility within the meaning of 
Article 123(1) of the Treaty and Article 1(1)(b)(ii) of R egulation (EC) No 3603/93, irrespective of 
whether the conditions for the application of Article 7 of Regulation (EC) No 3603/93 are met12. 
2.7 In this respect t he ECB notes , first, that according to the draft legislative provisions the Banca d’Italia 
 
9  Consistent with this interpretation, see Opinions CON/2005/29, CON/2013/16 and CON/2017/4. With regard to the 
issue o f NCBs’ financing of IMF quota increases, see Opinions CON/2011/97 and CON/2012/65.  
10  See International Monetary Fund, Balance of Payments and International Investment Position Manual  (sixth edn., 
2009), Chapter 8, Section F, p. 111.  
11 See also Opinions CON/2017/4, CON/2020/27, CON/2020/32, CON/2020/34 and CON/2020/37. As regards the credit 
quality of the claims on the PRGT, the protection of the PRGT’s loan resources is ensured by the IMF under a 
multilayered framework comprising IMF policy safeguards, f inancial buffers and the IMF’s de facto preferred creditor 
status.  
12  See Opinions CON/2016/21 and CON/2021/23.  
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4 is authori sed, not requir ed, to provide the new subsidies13. Second,  according to a combined reading 
of the draft legislative provisions and the explanatory memorandum and technical report , as described 
in paragraph 1.3,  the transfers to the IMF are to be made by the Banca d’Italia only after the receipt 
of an equal amount of funds from the Ministry of Economy  and Finance.  
2.8 Without prejudice to the above interpretation , the ECB recommends that the draft legislative 
provisions  are clarified to expli citly state  that the Banca d’Italia is to provide the new PRGT  subsidies  
to the IMF  only after it has received the necessary  funds from the Ministry of Economy  and Finance.    
Reimbursement in connection with the HIPC  Initiative  in favour of Sudan  
2.9 Where Member  State s are invited by the IMF to contribute non- refundable resources to a debt relief 
program me, such as  the debt relief program me for Sudan , the financing of their contribution by the 
NCB s will not result in any foreign claims . Consequently, the NCBs’  financing does not fall under the 
exemption laid down in Article 7 of Regulation (EC) No 3603/93 and is therefore not compatible with 
the prohibition of monetary financing.   
2.10 Against this backdrop, t he ECB welcomes the fact that the draft legislative provisions aim to take 
corrective action by way of the reimbursement to be made by the Ministry of Econom y and Finance 
to the Banca d’Italia of the resources contributed in connection with Italy’s participation in the debt 
relief program for Sudan.   
 
3. Financial independence  
3.1 From the perspective of the financial independence required of an NCB in the European System of 
Central Banks  under Article 130 of the Treaty14, the ECB takes note of the guarantee provided by the 
State under the draft legislative provisions  with respect to the reimbursement of principal and interest 
on the Banca d’Italia’s new loan to the PRGT . Also , from that perspective, the ECB welcomes the 
pre-funding by the Ministry of Economy  and Finance of the new subsidies to be provided to the PRGT . 
 
This opinion will b e published on EUR -Lex. 
  
Done at Frankfurt am Main, 28 December 2021 . 
 
[signed]  
 The President of the ECB  
Christine  LAGARDE  
 
13  See Article 127 (3) of the draft legislative provisions.  
14  Pursuant to the principle of financial independence, Member States may not put their NCBs in a position where they 
have insufficient financial resources to carry out their tasks. See ECB Convergence Report 2020, para. 2.2.3.