What is Extended Fund Facility (EFF)?
Historical Background
Key Points
7 points- 1.
Purpose: Supports comprehensive structural reform programs aimed at correcting deep-seated macroeconomic imbalances.
- 2.
Duration: Typically approved for a period of 3 to 4 years, allowing for a longer adjustment period.
- 3.
Repayment Period: Loans under the EFF have a longer repayment period, generally 4.5 to 10 years from the date of each disbursement.
- 4.
Conditionalities: Requires countries to implement a set of macroeconomic and structural policies to address the underlying causes of their balance of payments problems.
- 5.
Access Limits: Access to IMF resources under the EFF is subject to specific limits based on a country's quota, though exceptional access can be granted.
- 6.
Reviews: Programs are subject to periodic reviews by the IMF Executive Board to assess progress and ensure adherence to agreed-upon policies.
- 7.
Focuses on fiscal consolidation, debt restructuring, monetary policy reforms, and governance improvements.
Visual Insights
Extended Fund Facility (EFF) vs. Stand-By Arrangement (SBA)
This table compares the key features of the IMF's Extended Fund Facility (EFF) and Stand-By Arrangement (SBA), highlighting their distinct purposes, durations, and conditionalities, which is crucial for understanding IMF lending instruments.
| Feature | Extended Fund Facility (EFF) | Stand-By Arrangement (SBA) |
|---|---|---|
| Purpose | Addresses deep-seated structural imbalances causing medium-term BoP problems; supports comprehensive structural reforms. | Addresses short-term balance of payments (BoP) problems; focuses on macroeconomic stabilization. |
| Duration | Typically 3 to 4 years (can be up to 5 years in exceptional cases). | Typically 12 to 24 months (can be up to 36 months). |
| Repayment Period | Longer: 4.5 to 10 years from each disbursement. | Shorter: 3.25 to 5 years from each disbursement. |
| Conditionalities | Extensive structural reforms (fiscal, monetary, governance, debt restructuring) alongside macroeconomic policies. | Primarily macroeconomic policies (fiscal, monetary, exchange rate) to restore stability. |
| Focus | Structural transformation, long-term sustainability, addressing underlying causes. | Short-term stabilization, restoring market confidence, addressing immediate liquidity needs. |
| Reviews | Periodic reviews (e.g., semi-annual) to assess progress on structural benchmarks and macroeconomic targets. | Quarterly reviews to assess compliance with performance criteria. |
| Examples | Sri Lanka, Pakistan, Argentina (for deep structural issues). | Many countries facing temporary liquidity crunch (e.g., Egypt, Ukraine in some phases). |
Recent Developments
4 developmentsIncreasingly used by countries facing complex and protracted economic challenges, such as Sri Lanka, Pakistan, and Argentina.
Programs often include components related to climate change resilience and social safety nets.
The IMF has adapted EFF programs to address the unique challenges posed by the COVID-19 pandemic and subsequent global shocks.
Emphasizes the importance of debt sustainability and creditor coordination for successful program implementation.