Under an amendment approved by the IMF board today, the so- called extended fund facility can be approved from the start for as many as four years, the fund said in an e-mailed statement. Previously, such loans could be given for as many as three years initially and lengthened to four years later on.
The lending instrument was created in 1974 for countries that need “a prolonged period of adjustment and major policy shifts” to solve their balance-of-payments difficulties, the IMF said. While initially targeting developing economies, it has been used recently for loans to Portugal and Ireland and is the proposed format of a second, 28 billion-euro ($36.5 billion) loan to Greece to be discussed by the board tomorrow.
“Approvals of extended arrangements of up to four years would be appropriate in some cases,” the IMF said. That includes “if a balance of payments need beyond a three-year period exists, the necessary economic adjustment is of prolonged nature and is envisaged from the outset to take longer than three years, and adequate assurances exist that the member is able and willing to implement deep structural reforms.”
IMF Managing Director Christine Lagarde in a March 9 press release said that the loan to Greece will have a four-year duration.
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