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How The IMF Lends: Terms and conditions of financial facilities

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 2004
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Stand-By Arrangement and Extended Fund Facility

  • Stand-By Arrangement (introduced in 1952): Designed to address balance of payments difficulties that are short term; length of Stand-By Arrangements is typically 12-18 months with a legal maximum of 3 years.

    • Normal access limits: Annual: 100 percent of quota; cumulative: 300 percent of quota in combination with Extended Fund Facility.

    • Maturities (expected repayment)/(obligatory repayment): 2¼4 years/3¼5 years.

    • Charges: Basic rate of charge + level-based surcharges of 100 basis points on amounts above 200 percent of quota and 200 basis points on 300 percent of quota.

    • Conditions: Member adopts policies that provide confidence that its balance of payments difficulties will be resolved within a reasonable period.

    • Cumulative access: Above 25 percent of quota is subject to stricter conditions (known as upper credit tranche conditionality).

    • Phasing and monitoring: Quarterly disbursements contingent on observance of performance criteria and other conditions.

  • Extended Fund Facility (1974): Provides longer-term assistance in support of structural reforms that address longer-term balance of payments difficulties.

    • Normal access limits: Annual: 100 percent of quota; cumulative: 300 percent of quota in combination with Stand-By Arrangement.

    • Maturities (expected repayment)/(obligatory repayment): 4½7 years/4½10 years.

    • Charges: Basic rate of charge + level-based surcharges of 100 basis points on amounts above 200 percent of quota and 200 basis points above 300 percent of quota.

    • Conditions: Member adopts 3-year program, with structural agenda, and provides annual detailed statement of policies for the next 12 months.

    • Phasing and monitoring: Quarterly or semiannual disbursements contingent on observance of performance criteria and other conditions.

Special loans

  • Supplemental Reserve Facility (1997): Provides short-term assistance to members with balance of payments difficulties related to a sudden and disruptive loss of market confidence. Available only as a supplement to a regular arrangement.

    • Access limits: None; this facility is available only when access under associated regular arrangement would otherwise exceed either annual or cumulative limit.

    • Maturities (expected repayment)/(obligatory repayment): 2—2½ years/2½—3 years.

    • Charges: Basic rate of charge + 300 basis points rising to a maximum of 500 basis points after 2½ years.

    • Conditions: Program under associated arrangement, with strengthened policies to address a loss of market confidence.

    • Phasing and monitoring: Facility available for one year; front-loaded access with two or more disbursements.

  • Compensatory Financing Facility (1963): Covers a shortfall in a member’s export earnings and services receipts or an excess in cereal import costs that is temporary and arises from events beyond the member’s control.

    • Access limits: Maximum 45 percent of quota for each element—export shortfall and excess cereal import costs––and a combined limit of 55 percent of quota.

    • Maturities (expected repayment)/(obligatory repayment): 2¼—4 years/3¼—5 years.

    • Charges: Basic rate of charge; not subject to surcharges.

    • Conditions: Usually available only when a member already has a Stand-By Arrangement or when its balance of payments position, apart from its export shortfall or import excess, is otherwise satisfactory.

    • Phasing and monitoring: Typically disbursed over a minimum of six months and in accordance with the phasing provisions of the arrangement.

  • Emergency Assistance

    • 1. Natural disasters (1962): Provides quick, mediumterm assistance to members with balance of payments difficulties related to natural disasters.

    • 2. Postconflict (1995): Provides quick, medium-term assistance for balance of payments difficulties related to the aftermath of civil unrest or international armed conflict.

      • Access limits: 25 percent of quota, although up to an additional 25 percent of quota can be made available in exceptional cases.

      • Maturities (expected repayment)/(obligatory repayment): No early repayment expectation/3¼—5 years

      • Charges: Basic rate of charge; not subject to surcharges; possibility of interest subsidy if financing is available; currently, the interest subsidy is available only for low-income countries receiving emergency postconflict assistance.

      • Conditions: Reasonable efforts to overcome balance of payments difficulties and focus on institutional and administrative capacity building to pave the way toward an upper credit tranche arrangement or an arrangement under the Poverty Reduction and Growth Facility. The conditions for emergency postconflict assistance include that IMF support would be part of a concerted international effort to address the aftermath of the conflict.

      • Phasing and monitoring: Typically none.

Loans for low-income members

  • Poverty Reduction and Growth Facility (1999): (Replaced the Enhanced Structural Adjustment Facility, created in 1987.) Provides longer-term assistance for deep-seated, structural balance of payments difficulties; aims at sustained, poverty-reducing growth.

    • Access limits: 140 percent of quota; exceptional maximum, 185 percent.

    • Maturities (expected repayment)/(obligatory repayment): No early repayment expectation/3¼5 years.

    • Charges:Concessional interest rate: ½ of 1 percent a year; not subject to surcharges.

    • Conditions: Based on a Poverty Reduction Strategy Paper prepared by the country in a participatory process, and integrating macroeconomic, structural, and poverty reduction policies.

    • Phasing and monitoring: Semiannual (or occasionally quarterly) disbursements contingent on observance of performance criteria and completion of reviews.

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