Financial Times

IMF revamps lending and conditionality framework

 

IMF this week announced a major overhaul of its lending and conditionality framework.
As part of moves to support countries during the global economic crisis, the IMF said it is beefing up its lending capacity and has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries’ varying strengths and circumstances, according to an IMF statement.

The IMF announced the creation of a new flexible credit line for countries with very strong fundamentals, policies, and track records of policy implementation. Once approved, these loans—a type of insurance policy for strong performers—can be fully disbursed when the need arises rather than being conditioned on compliance with policy targets as in traditional IMF-supported programs.

The IMF also announced that it would double non-concessional loan access limits, enhance its traditional Stand-By facility, and simplify lending terms. Complementary reforms of concessional lending instruments for low-income members are also in force.

“These reforms represent a significant change in the way the Fund can help its member countries—which is especially needed at this time of global crisis,” said IMF Managing Director Dominique Strauss-Kahn. “More flexibility in our lending along with streamlined conditionality will help us respond effectively to the various needs of all our member countries—especially emerging market and developing countries.

This, in turn, will help them to weather the crisis and return to sustainable growth.” Japan has already provided the IMF with an additional $100 billion to bolster the Fund’s lendable resources during the current crisis, and the European Union has committed €75 billion. Efforts are under way to further increase IMF resources in the runup to the April 2 summit. Before the Japanese announcement, the IMF had $250 billion to lend.


 
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