The Extended Credit Facility (ECF) provides financial assistance to
countries with protracted balance of payments problems. The ECF was
created under the newly established Poverty Reduction and Growth Trust (PRGT)
as part of a broader reform to make the Fund’s financial support more
flexible and better tailored to the diverse needs of LICs, including in
times of crisis. 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.
Financial assistance tailored to country needs
Purpose. Like its predecessor the PRGF, the ECF
supports countries’ economic programs aimed at moving toward a stable and
sustainable macroeconomic position consistent with strong and durable
poverty reduction and growth. The ECF also provides policy support and can
help catalyze foreign aid.
Eligibility. The ECF is available to all PRGT-eligible
member countries that face a protracted balance of payments problem, i.e.
when the resolution of the underlying macroeconomic imbalances would be
expected to extend over the medium- or longer term.
Duration and repeated use. Assistance under an
ECF arrangement is provided for a three-year period, extendable for up to
two additional years. Following the expiration or cancellation of an ECF
arrangement, additional ECF arrangements may be approved.
Access. Access to ECF financing is determined
on a case-by-case basis, taking into account the country’s balance of
payments need and strength of its economic program, and is guided by access
norms.1
Total access to concessional financing under the PRGT is limited to
100 percent of quota per year, and 300 percent of quota in total. These
limits can be exceeded in exceptional circumstances. Access may be augmented
during an arrangement if needed.
Streamlined and focused conditionality
Under the ECF, member countries agree to implement a set of policies that
will help them support significant progress toward a stable and sustainable
macroeconomic position. These commitments, including specific conditions,
are described in the country’s letter of intent.
The IMF has streamlined program conditionality to focus on policy actions
that are critical for achieving the program’s objectives. ECF-supported
programs should be consistent with the country’s poverty reduction and
growth strategy. Related documentation requirements have been made more
flexible, allowing time to complete the poverty reduction strategy paper
until the second program review under the ECF.
Quantitative conditions are used to monitor
macroeconomic policy variables such as monetary aggregates, international
reserves, fiscal balances, or external borrowing, based on the country’s
program objectives. ECF-supported programs aim to safeguard social and other
priority spending, including through explicit quantitative targets where
possible.
Structural benchmarks help monitor critical
reforms to achieve program goals; progress against these benchmarks is
assessed in the context of program reviews. These measures vary across
programs but could, for example, include measures to improve financial
sector operations, build up social safety nets, or strengthen public
financial management. Legally binding structural conditions have been
abolished.
Program reviews by the IMF’s Executive Board
play a critical role in assessing performance under the program and allowing
the program to adapt to economic developments. Reviews are normally
conducted every six months, but quarterly monitoring is possible in case of
high economic volatility.
Highly concessional lending terms
Financing under the ECF carries a zero interest rate, with a grace period
of 5½ years, and a final maturity of 10 years. The Fund reviews the level of
interest rates for all concessional facilities under the PRGT every two
years.
1 Access norms provide general guidance and are used flexibly,
representing neither ceilings nor entitlements. Norms are set at 120 percent
of quota per arrangement, or 75 percent of quota if the country’s total
concessional credit outstanding is 100 percent of quota or above.
