As part of the IMF‘s overhaul, the IMF Board has agreed to further changes in key credit lines: the Contingency Credit Line (CCL), the Extended Fund Facility and Stand-by Loans. It has also decided that countries which have completed their programmes but hold outstanding loans will be monitored every six months. Board discussions of country economic reviews should be made public if governments agree.
The eligibility criteria for the CCL – a fund to help countries facing financial crises – remain unchanged. Countries in the CCL will be monitored on a framework of macroeconomic and structural policies determined by the government rather than detailed targets set by the Fund. The Fund will monitor countries on a six-monthly basis to ensure they remain compliant with the eligibility criteria.
Access to CCL resources in a crisis will be more automatic. Firstly, the IMF has removed the condition that prior to receiving CCL resources an assessment should be made of the country’s compliance with the agreed framework of macro and structural policies. The IMF will, however, assess whether the crisis was caused by poor national policies. Secondly, a large proportion of funding will be made available immediately without conditions, whilst the remainder will be conditioned on a review of macroeconomic policy reforms. The interest rate on CCL loans has also been cut in half.
Rules for accessing EFF funds have been tightened to ensure that only those countries with longer-term problems are eligible and repayment periods have been shortened from ten to seven years.
Repayment periods have also been shortened on Stand-by loans, which must begin to be repaid after two years and should be fully repaid after four. Surcharges have also been introduced on Standby and EFF loans.
Whilst discussions have focussed on the adequacy of lending facilities for middle-income countries, the Bretton Woods Project has raised concerns that no attention has been paid to the needs of the poorest countries, many of which have relatively open capital accounts and frequently suffer financial crises. These countries have structural deficiencies in their financial systems but still need access to short-term finance to address problems caused by unexpected outflows. However, many are constrained by the IMF‘s own conditionality from borrowing from short-term lending facilities because they are charged at market rates. IMF staff have acknowledged the problem and confirm that they are considering what to do. One option is to subsidize EFF or Standby loans.