Opinion of the European Central Bank of 22 February 2017 on Italy’s participation in a number of International Monetary Fund programmes: the extension of the New Arrangements to Borrow, the contribution to the Poverty Reduction and Growth Trust, and a new bilateral loan agreement (CON/2017/4)
Date: 2017-02-22
Institutions: European Central Bank
Subjects: International Monetary Fund, Italy, central bank, economic growth, national law, support mechanism

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 February 2017 

on Italy’s participation in a number of International Monetary Fund programmes: the extension of 

the New Arrangements to Borrow, the contribution to the Poverty Reduction and Growth Trust, 

and a new bilateral loan agreement  

(CON/2017/4) 

Introduction and legal basis 

On 20 February 2017, the European Central Bank (ECB) received a request from the Italian Ministry of 
Economic Affairs and Finance for an opinion on amendments (hereinafter the ‘draft amendments’)1 to a 
decree  law  on  the  extension  of  deadlines2  (hereinafter  the  ‘Decree  Law’).  The  relevant  amendments 

concern  Italy’s  participation  in  a  number  of  International  Monetary  Fund  (IMF),  or  IMF-related, 

programmes.  The  Decree  Law  must  be  converted  into  law  within  60  days  of  publication  (i.e.,  by  28 

February 2017), failing which the Decree Law will be invalid with retroactive application. 

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/EC3, as 

the draft amendments to the Decree Law relate to a national central bank (NCB). 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. 

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Purpose of the amendments to the Decree Law 

1.1  Extension of the Banca d’Italia’s participation in the New Arrangements to Borrow  

The  draft  amendments  to  the  Decree  Law  authorise  the  Banca  d’Italia  (BdI)  to  extend  the  IMF’s 

New  Arrangements  to  Borrow  (NAB)  scheme  until  16  November  2022  and  to  make  available  a 

credit  line  of  up  to  6  898.52  million  special  drawing  rights  (SDR)  (currently  equivalent  to 

approximately  EUR  8.7  billion).  This  facility  will  be  funded  from  the  BdI’s  resources.  The  State 

budget will guarantee the reimbursement of principal and interest and will cover any exchange rate 

risk on the facility provided by the BdI under the Decree Law. 

The  NAB  was  created  in  1998  to  enhance  the  IMF’s  lending  capacity.  Italy  was  among  the  first 

participating States. When it entered into the scheme the Italian State did not provide the BdI with 

any  guarantees.  On  4  November  2016,  the  IMF’s  Executive  Board  adopted  a  decision  on  the 

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Amendments to Draft Law n. 2630 of 5 January 2017. 
Decree  law  No  244  of  30  December  2016,  Gazzetta  Ufficiale  della  Repubblica  Italiana,  Serie  generale  No  304, 
30.12.2016. 

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). 

 
 
 
 
                                                 
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renewal of the NAB scheme for an additional five years4. The renewal decision does not require the 

participating States to confirm their renewed participation in the scheme. Continued participation is 

assumed if the concerned State fails to communicate its withdrawal at least six months before the 
entry into force of the renewal decision, i.e. by April 20175. 

1.2  New contribution to the Poverty Reduction and Growth Trust 

1.2.1  The  draft  amendments  to  the  Decree  Law  also  authorise  the  BdI  to  provide  additional  loans  at 

market rates of up to SDR 400 million to the IMF’s Poverty Reduction and Growth Trust (PRGT). 

The  loan  will  be  funded  from  the  BdI’s  resources  and  the  State  budget  will  guarantee  the 
reimbursement of principal and interest6. 

1.2.2  On  23  July  2009,  the  IMF’s  Executive  Board  approved  wide-ranging  modifications  to  upgrade  its 
concessional  financial  facilities  for  low-income  countries7.  The  decision  adopted  by  the  IMF’s 

Executive  Board  established  the  PRGT,  which  replaced  and  expanded  the  former  Poverty 

Reduction  and  Growth  Facility-Exogenous  Shocks  Facility.  The  PRGT  includes  new  financially 

improved  credit  lines  that  are  considered  to  be  more  adapted  to  low-income  countries’  needs.  In 

view  of  the  growing  number  of  requests  from  low-income  countries,  additional  contributions  are 

being requested from donor countries.   

1.3  Authorisation for the BdI to grant bilateral loans to the IMF on behalf of Italy  

The draft amendments to the Decree Law also authorise the BdI to conclude a new bilateral loan 

agreement  with  the  IMF  to  implement  Italy’s  commitment  to  contribute  to  strengthening  the  tools 

available  to  the  IMF  to  deal  with  the  financial  crisis.  As  the  bilateral  loan  agreement  concluded 

between  Italy  and  the  IMF  expired  in  October  2016,  the  draft  amendments  to  the  Decree  Law 

authorise  the  BdI  to  conclude  a  new  bilateral  loan  agreement  with  the  IMF  denominated  in  SDR 
and up to a maximum amount equivalent to EUR 23 480 million8. The bilateral loan agreement is 

intended to expire on 31 December 2019, unless it is extended to 31 December 2020. The State 

budget will guarantee the reimbursement of principal and interest and will cover any exchange rate 
risk on the loans provided by the BdI under the Decree Law9. 

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See the IMF’s press release No. 16/502  https://www.imf.org/en/News/Articles/2016/11/11/PR16502-IMF-Executive-
Board-Approves-Renewal-of-New-Arrangements-to-Borrow.  

Currently, the relations between Italy and the IMF are regulated by Article 2(13) and (15) of the Decree Law on the 
extension of deadlines and on urgent measures in the field of taxation, of 29 December 2010, n. 225, later converted 
by  Law  of  26  February  2011,  n.  10.  According  to  the  Decree  Law,  (i)  Italy’s  contribution  to  the  NAB  amounted  to 
EUR  13.58  billion,  which  was  funded  from  the  Banca  d’Italia’s  resources  though  a  loan  expiring  on  17  November 
2017; and (ii) the Banca d’Italia was authorised to conclude an interim bilateral loan to the IMF up to EUR 8.11 billion 
on  Italy’s  behalf.  See  ECB  Opinion  CON/2011/10,  all  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu . 
Currently, Italy’s participation in the PRGT is regulated by Article 2(14) and (15) of the Decree Law on the extension 
of deadlines and on urgent measures in the field of taxation, of 29 December 2010, n. 225, later converted by Law of 
26  February  2011, n.  10.  According  to  the decree  law,  the  Banca d’Italia  is  authorised  to  provide  loans  at  market 
rates of up to SDR 800 million. See ECB Opinion CON/2011/10. 

See the IMF’s Public Information Notice No. 09/94 https://www.imf.org/en/News/Articles/2015/09/28/04/53/pn0994.  
As defined in paragraph 1(a) of the draft loan agreement annexed to the draft amendments. 

Article  25(2)  of  the  Decree  Law  of  29  December  2011,  n.  216,  converted  into  Law  of  24  February  2012,  n.  14, 
establishes  a  legal  basis  for  the  BdI  to  negotiate  a  bilateral  loan  agreement  with  the  IMF.  See  ECB  Opinion 
CON/2012/20. 

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2.   General observation 

The  ECB  supports  an  adequately  resourced  IMF  at  the  centre  of  the  international  monetary  system, 

where  it  makes  an  important  contribution  to  global  economic  and  financial  stability.  With  the  backing  of 

Union  Member  States,  the  IMF  has,  in  response  to  the  financial  crisis,  considerably  increased  its 

resources – both in terms of quotas and borrowed resources, such as the NAB and bilateral loans. 

3.   Monetary financing prohibition 

3.1  The draft amendments to the Decree Law must comply with the prohibition of monetary financing 

under Article 123 of the Treaty, which is subject to certain exemptions contained in Article 123(2) of 

the  Treaty,  Article  21.2  of  the  Statute  of  the  European  System  of  Central  Banks  and  of  the 
European  Central  Bank  and  Council  Regulation  (EC)  No  3603/9310.  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. Recital  14  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  in  foreign  claims  which 

have 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 rationale11. 

3.2  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-residents12. The BdI’s transfer of Italy’s contribution 

to the IMF’s PRGT,  its granting of loans under the NAB and its bilateral agreements with the IMF 

on behalf of Italy, as set out in the draft amendments to the Decree Law, fall within the exemption 

of  Article  7  of  Regulation  (EC)  No  3603/93  because  this  financing  results  in  foreign  currency 

(SDR)-denominated  claims  of  the  BdI  against  non-resident  persons  (the  IMF  and  an  IMF-
administered trust) that have all the characteristics of reserve assets13. 

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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). 

Consistent with this interpretation, see Opinions CON/2005/29 and CON/2013/16. With regard to the issue of NCBs’ 
financing of IMF quota increases, see Opinions CON/2012/65 and CON/2011/97.  

See  International  Monetary  Fund,  Balance  of  Payments  and  International  Investment  Position  Manual  (Sixth  ed., 
2009), pages 111-18. 
Annex IV, Asset 2.1 of Guideline (EU) 2016/2249 of the European Central Bank of 3 November 2016 on the legal 
framework  for  accounting  and  financial  reporting  in  the  European  System  of  Central  Banks  (ECB/2016/34) 
(OJ L 347, 20.12.2016, p. 37) lists  ‘general arrangements  to borrow,  loans under special borrowing arrangements, 
deposits made to trusts under the management of the IMF’ as ‘Receivables from the IMF’. This includes the BdI’s 
transfer  of  Italy’s  contribution  to  the  IMF’s  PRGT,  as  the  latter  is  described  by  the  IMF  as  a  ‘financing  package 
[seeking]  new  loan  resources  from  members  of  SDR  10.8  billion  (including  SDR  1.8  billion  for  a  voluntary 
encashment regime under which the participating lenders may ask for a ready repayment of loans in case of balance 
of  payments  needs)’.  See  http://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/04/Financing-the-IMFs-
Concessional-Lending-to-Low-Income-Countries.  

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3.3  Based on the foregoing, the ECB considers that the BdI’s transfer of Italy’s contribution to the IMF’s 

PRGT and grant of loans under the NAB and bilateral agreements with the IMF on behalf of Italy 
should not be regarded as a form of monetary financing prohibited under the Treaty14.  

4.  

Financial independence 

4.1  From the perspective of the financial independence required of an NCB in the European System of 

Central Banks under Article 130 of the Treaty, pursuant to which Member States may not put their 

NCBs  in  a  position  where  they  have  insufficient  financial  resources  to  carry  out  their  ESCB  or 
Eurosystem-related tasks15, the ECB welcomes the guarantee under the draft amendments to the 

Decree-Law to be provided by the State with respect to the reimbursement of principal and interest 

on BdI’s loans, which in the case of the extension of participation in the NAB and the new bilateral 

loan agreement with the IMF will also cover any exchange rate risk on the loans provided by BdI. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 22 February 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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15  

See  also  ECB  Opinions  CON/2009/100,  CON/2010/40  and  CON/2011/10.  All  ECB  opinions  are  available  on  the 
ECB’s website at www.ecb.europa.eu. 
ECB Convergence Report 2016, p. 25.  

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