Extended Credit Facility
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| Extended Credit Facility | |
|---|---|
 | |
| Name | Extended Credit Facility |
| Established | 2010 |
| Institution | International Monetary Fund |
| Type | Financial assistance |
| Purpose | Balance of payments support |
Extended Credit Facility
The Extended Credit Facility provides medium- to long-term financial assistance for countries confronting protracted balance of payments problems linked to structural weaknesses and shocks. It is administered by the International Monetary Fund and interacts with multilateral lenders like the World Bank, Asian Development Bank, African Development Bank, and bilateral creditors such as the United States Department of the Treasury and the Ministry of Finance (Japan). Programs under the facility frequently engage with institutions including the European Central Bank, Bank of England, Deutsche Bundesbank, and regional authorities like the Economic Community of West African States and the Southern African Development Community.
Overview
The facility succeeded earlier arrangements and aligns with the Poverty Reduction and Growth Trust, the Stand-By Arrangement, and the Extended Fund Facility. Its creation reflected lessons from the Asian Financial Crisis, the Latin American debt crisis, and sovereign cases such as Argentina, Greece, and Iceland, prompting reforms coordinated with the Paris Club, the Bretton Woods Conference legacy, and guidance from the G20. The design incorporates surveillance tools used by the International Monetary Fund's Independent Evaluation Office and draws on conditionality practices seen in the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative.
Eligibility and Purpose
Eligible members include low-income countries eligible for concessional support through the Poverty Reduction and Growth Trust and others confronting medium-term structural problems akin to those in Mozambique, Zambia, and Sri Lanka. The facility targets persistent external imbalances like those experienced by Tunisia, Egypt, and Lebanon, and supports reforms touching institutions such as the Central Bank of Nigeria, Banco de México, and the Bank of Ghana. Objectives align with frameworks promoted by United Nations Development Programme, International Labour Organization, and World Health Organization policy linkages where macroeconomic stability interfaces with social sectors in countries like Kenya and Ethiopia.
Terms and Conditions
Financing under the facility typically features extended maturities and concessional rates compared to the Stand-By Arrangement and is harmonized with the World Bank Group lending modalities including the International Development Association and the International Bank for Reconstruction and Development. Conditionality often spans fiscal consolidation measures, tax reforms exemplified by initiatives in Peru and Chile, monetary policy anchors seen in Poland and Hungary, and structural reforms modeled after Ireland and South Korea. Disbursement tranches relate to quantitative performance criteria and structural benchmarks similar to those in programs for Portugal and Spain.
Application and Approval Process
Applications begin with Article IV consultations conducted by IMF staff alongside missions incorporating experts from the United Nations Conference on Trade and Development, the Organisation for Economic Co-operation and Development, and regional development banks like the Islamic Development Bank. Executive Board approval follows staff appraisal, with inputs from directors representing constituencies led by countries such as the United States, China, France, and Germany. Negotiations frequently involve coordination with bilateral creditors including the People's Bank of China and creditor committees modeled on Paris Club practices, and legal frameworks referencing instruments like the Treaty on the Functioning of the European Union in European contexts.
Monitoring and Conditionality
Monitoring relies on periodic reviews, performance criteria, and program reviews published by the International Monetary Fund and scrutinized by oversight bodies such as the International Court of Justice only insofar as sovereign disputes emerge. Conditionality may include privatization plans comparable to measures in United Kingdom and New Zealand reforms, public financial management improvements inspired by Botswana and Rwanda, and governance benchmarks used by the Extractive Industries Transparency Initiative and the Transparency International. Civil society organizations including Oxfam, Amnesty International, and Human Rights Watch often comment on social implications, while academic analyses appear in journals associated with Harvard University, London School of Economics, and Massachusetts Institute of Technology.
Impact and Criticism
Supporters cite stabilization outcomes like macroeconomic normalization in countries such as Ghana and Côte d'Ivoire, and credit continuity with sovereign debt restructurings as in Uruguay and Dominican Republic. Critics point to social costs observed during adjustment episodes in Argentina, Greece, and Jamaica and raise concerns echoed by organizations like Trade Union Congress (UK) and networks such as Global Justice Now. Debates involve methodologies used by the International Monetary Fund's Independent Evaluation Office and policy prescriptions debated in fora including the World Economic Forum and the Bretton Woods Project.
Case Studies and Usage by Country
Notable programs using comparable extended arrangements include assistance to Mozambique during debt distress, adjustments in Zambia and Sri Lanka tied to external shock management, and policy engagements in Tunisia and Egypt focused on fiscal consolidation and structural reforms. Other examples encompass coordination in Lebanon and multi-year programs in Ethiopia and Kenya that tied macro frameworks to sectoral reforms in health and education, interacting with partners like the Global Fund to Fight AIDS, Tuberculosis and Malaria and the World Food Programme. Each case shows interaction with creditors such as the Export-Import Bank of China, bilateral donors like United Kingdom Department for International Development, and regional mechanisms including the West African Economic and Monetary Union.