Lending to low-income countries

To help low-income countries weather the severe impact of the global financial crisis, the IMF has revamped its concessional lending facilities to make them more flexible and meet increasing demand for financial assistance from countries in need. These changes became effective in January 2010. Once additional loan and subsidy resources are mobilized, these changes will boost available resources for low-income countries to $17 billion through 2014. To ensure resources are available for lending to low-income countries beyond 2014, the IMF approved an additional $2.7 billion in remaining windfall profits from gold sales as part of a strategy to make lending to low-income countries sustainable.

Three types of loans were created under the new Poverty Reduction and Growth Trust (PRGT) as part of this broader reform: the Extended Credit Facility, the Rapid Credit Facility and the Standby Credit Facility.

The Extended Credit Facility (ECF) provides financial assistance to countries with protracted balance of payments problems. The ECF succeeds the Poverty Reduction and Growth Facility (PRGF) as the Fund?s main tool for providing medium-term support LICs, with higher levels of access, more concessional financing terms, more flexible program design features, as well as streamlined and more focused conditionality.

The Rapid Credit Facility (RCF) provides rapid financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need. The RCF streamlines the Fund?s emergency assistance, provides significantly higher levels of concessionality, can be used flexibly in a wide range of circumstances, and places greater emphasis on the country?s poverty reduction and growth objectives.

The Standby Credit Facility (SCF) provides financial assistance to low-income countries (LICs) with short-term balance of payments needs. It provides support under a wide range of circumstances, allows for high access, carries a low interest rate, can be used on a precautionary basis, and places emphasis on countries? poverty reduction and growth objectives.

Several low-income countries have made significant progress in recent years toward economic stability and no longer require IMF financial assistance. But many of these countries still seek the IMF's advice, and the monitoring and endorsement of their economic policies that comes with it. To help these countries, the IMF has created a program for policy support and signaling, called the Policy Support Instrument.

Debt relief

In addition to concessional loans, some low-income countries are also eligible for debts to be written off under two key initiatives.

The Heavily Indebted Poor Countries (HIPC) Initiative, introduced in 1996 and enhanced in 1999, whereby creditors provide debt relief, in a coordinated manner, with a view to restoring debt sustainability; and

The Multilateral Debt Relief Initiative (MDRI), under which the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF) canceled 100 percent of their debt claims on certain countries to help them advance toward the Millennium Development Goals.

4. Governance

Date: 2016-06-12; view: 206