IMF(International Monetary Fund) provides assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position.
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IMF’s Extended Fund Facility:
1) It provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period
2) As structural reforms to correct deep-rooted weaknesses often take time to implement and bear fruit, EFF engagement and repayment cover longer periods than most Fund arrangements.
3) The funds are provided for up to 3 to 4 years. And amounts drawn under an EFF are to be repaid over 5–10 years.
4) The size of borrowing under EFF is guided by a country’s financing needs, capacity to repay, and track record with past use of IMF resources
5) When a country borrows from the IMF, it commits to undertake policies to overcome economic and structural problems. Under an EFF, these commitments, including specific conditions (like elimination of price controls, ceiling on govt. borrowing minimum level of forex etc), are expected to have a strong focus on structural reforms to address institutional or economic weaknesses, in addition to policies to maintain macroeconomic stability.
IMF-Pak Recent Agreement:
The International Monetary Fund said, it has reached a staff-level agreement with the Pakistani government for the revival of a bailout program, providing a welcome reprieve to the country as it struggles with a cratering economy, depreciating currency, high inflation and political instability.
The various financing facilities of IMF are :
(a) Extended Fund Facility
(b) Stand-by Arrangements
(c) Precautionary and Liquidity Line
(d) Flexible Credit Line.
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