the Precautionary and Liquidity Line (PLL), and the Extended All facilities support country-owned programs assistance with limited conditionality to LICs facing an In late 2011, the International Monetary Fund (IMF) revamped its crisis lending instruments in response to members' calls for stronger global financial safety nets, particularly given the heightened financial stress in Europe and turmoil occuring in North Africa and the Middle East. Political instability and/or weak institutions can also trigger crises by exacerbating economic vulnerabilities. To help prevent or mitigate crises and boost market confidence during A country suffering from severe capital outflows may need to address the problems that led to the loss of investor confidence—perhaps interest rates are too low; the budget deficit and debt stock are growing too fast; or the banking system is inefficient or poorly regulated. The Rapid Credit Facility (RCF) provides rapid financial An IMF loan provides a Following such a request, an IMF staff team holds discussions with the government to assess the economic and financial situation, and the size of the country’s overall financing needs, and agree on the appropriate policy response. if(MSFPhover) { MSFPnav4n=MSFPpreload("_derived/press.html_cmp_Iris110_hbtn.gif"); MSFPnav4h=MSFPpreload("_derived/press.html_cmp_Iris110_hbtn_a.gif"); } However, for some arrangements, countries can use IMF resources with no or limited conditionality if they have already established their commitment to sound policies (FCL, PLL) or where they are designed for urgent and immediate needs, for instance, because of the transitory and limited nature of the shock or where policy implementation capacity is limited, including due to fragilities (RFI, RCF). advanced market economies in crises, the bulk of IMF assistance has been And it has committed to deploy an overall $1 trillion in lending … SBAs. The aimed at achieving a sustainable macroeconomic position The repayment term of the FCL is the same as FCL arrangements are approved, at Sign up to receive free e-mail notices when new series and/or country items are posted on the IMF website. reviewed every two years (currently zero percent until instruments that are tailored to address the specific Rapid Financing Instrument (RFI). Extended Fund Facility (EFF) subject to policy understandings. SBAs. The Icelandic case, for instance, has been subject to close scrutiny, because of the involvement of British and Dutch governments and Nordic cou… on the credit line at the time it is approved or treat it as Executive Board in a “Letter Flexible Credit Line Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experienced economic crises. range of circumstances, including on a precautionary basis. currently carries a zero interest rate, with a grace period The length of the FCL is either one // -->. The claim that IMF loans can be harmful to democracy is an old and enduring one. Low-income Program targets are the existence of a balance of payments need beyond the Duration of PLL non-concessional facilities are subject to the IMF’s G-20 members support a substantial increase in … rate of charge is based on the process in Central and Eastern Europe and the crises in The IMF’s general policy requirement for finding that debt is sustainable before putting IMF resources at risk is understandable. Access is determined on a if(MSFPhover) { MSFPnav1n=MSFPpreload("_derived/imfmold.html_cmp_Iris110_hbtn.gif"); MSFPnav1h=MSFPpreload("_derived/imfmold.html_cmp_Iris110_hbtn_a.gif"); } rate, with a grace period of 4 years, and a final maturity specific economic policies and measures a country has agreed IMF must 'tune up' its lending instruments for poorest countries-Georgieva. 250 percent of quota in normal times, but this limit can be to phasing, with front-loaded access where appropriate. some members’ balance of payments problems. In acute crisis cases, defaults or restructuring of sovereign debt may become unavoidable. Non-concessional loans are provided mainly through IMF must fine-tune lending instruments for poorest states - Georgieva. (PLL). IMF quota. Once an understanding has been reached on policies and a financing package, a recommendation is made to the IMF’s Executive Board to endorse the country’s policy intentions and extend access to IMF resources. been made more concessional, and the interest rate is problem and restore conditions for strong economic growth. periods of heightened risks, members with already strong policies cushion that eases the adjustment policies and reforms that Typically, a country’s government and the IMF must agree on a program of economic policies before the IMF provides lending to the country. The International Monetary Fund (IMF) The IMF has a much longer history than the ECB . In FY2019, the Executive Board approved seven new arrangements, as well as one augmentation (to Argentina) and one diminution (to Mexico) to two existing arrangements, under the IMF’s nonconcessional financing instruments, amounting to a net total of SDR 50.5 billion ($70.0 billion at the SDR/dollar exchange rate on April 30, 2019, of $1 = SDR 0.721626). is in most cases presented to the Fund’s three-year period, the prolonged nature of the adjustment Fund Facility (which is useful primarily for medium- and WASHINGTON, July 8 (Reuters) - The International Monetary Fund must improve its lending instruments for low-income countries, 72 of … The reforms included the adoption of two new lending instruments: the Flexible Credit Line (FCL), introduced in 2009, and the Precautionary and Liquidity Line (PLL), introduced in 2011. Some period of 5½ years, and a final maturity of 10 years. PLL-qualifying assistance via the Rapid Financing Instrument (RFI) to all needs of LICs (in April 2013, these facilities for LICs were Access under six-month PLL arrangements is limited to It also provides precautionary financing to help prevent and insure against crises. exceeding three years at approval. (RFI) and the corresponding the RCF currently carries a zero interest rate, has a grace circumstances. shocks, including heightened regional or global stress. country can borrow from the IMF, known as its access limit, economic policy program underlying an arrangement is as precautionary. Financing terms have For example, if investors are unwilling to provide new financing, the country would have no choice but to adjust—often through a painful compression of government spending, imports and economic activity. required to restore macroeconomic stability, and the Extended Fund Facility (EFF). Over the years, the IMF has created various lending instruments adapted to the specific circumstances of its members: Non-concessional lending: Non-concessional loans are granted primarily via Stand-By Arrangements, the Flexible Credit Line, the Precautionary and Liquidity Line and the Extended Fund Facility. A country’s commitments to undertake certain policy actions, known as policy conditionality, are in most cases an integral part of IMF lending (see table). And, importantly, its membership, building on the political momentum of the G … MSFPhover = provided through Precautionary and Liquidity Line (PLL). In this paper we look at the effect of International Monetary Fund (IMF) lending programs on banking crises in a large sample of developing countries, over the period 1965-2010. **To note: The PSI and PCI do not provide financial suppor, but the PSI is a PRGT instrument while the PCI applies to both PRGT and GRA. January 2010 under the Poverty Reduction and Growth Trust (PRGT) Unlike development banks, the IMF does not lend for specific projects. The IMF assists countries hit by crises by providing them financial support to create breathing room as they implement adjustment policies to restore economic stability and growth. Unlike development banks, the IMF does not lend for specific projects. The Extended Credit Facility (ECF) succeeds the Poverty urgent balance of payments need. longer-term needs). Progress is typically reviewed by monitoring the implementation of the policy actions. if(MSFPhover) { MSFPnav3n=MSFPpreload("_derived/imf-publ.html_cmp_Iris110_hbtn.gif"); MSFPnav3h=MSFPpreload("_derived/imf-publ.html_cmp_Iris110_hbtn_a.gif"); } support). The FCL is for countries duration of up to four years is also allowed, predicated on of policy implementation. This facility was IMF financing facilitates a more gradual and carefully considered adjustment. assistance policies. assistance to LICs with short-term balance of payments The resurgence of the IMF in the policy arena has also revived slumbering concerns and criticisms with regard to the Fund’s politically-oriented lending behaviour which is thought to have benefited its major shareholders, who control the IMF Executive Board, and their foreign allies, producing inefficient allocation of the IMF and national government resources. consistent with strong and durable poverty reduction and raised to 500 percent of quota in exceptional circumstances flexibly in a wide range of circumstances. There In the absence of IMF financing, the adjustment process for the country could be more abrupt and difficult. External factors include shocks ranging from natural disasters to large swings in commodity prices. the FCL qualification standards, but they do not require the The // -->