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 Low Income
Countries (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 to LICs, with higher levels of access to
financial resources, 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 can also help catalyze additional
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 an initial duration from three to up to four
years, with an overall maximum duration of five years. Following the
expiration, cancellation, or termination 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 total outstanding concessional credit of
300 percent of quota. 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 over the medium term. 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 based on the country’s own development
strategy and aim to safeguard social objectives. Related documentation
requirements have been made more flexible, by allowing the program documents
of countries that have a valid poverty reduction strategy paper covering a
year from the date of the program review to describe how the current fiscal
budget, the upcoming fiscal budget (if available), and the planned
structural reforms advance implementation of a country’s poverty reduction
strategy.
Quantitative conditions are used to monitor
macroeconomic policy variables such as monetary aggregates, international
reserves, fiscal balances, and 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
macro-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 scheduled at most
six months apart.
Highly concessional lending terms
Financing under the ECF carries a zero interest rate through end-2014,
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, with the next review expected to take place in
end-2014.
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. For countries whose outstanding
concessional credit is above 200 percent of quota, the norms do not
apply, and access is guided by consideration of the cumulative
access limit of 300 percent of quota, the expectation of future need
for Fund support, and the repayment schedule.
