An IMF loan is usually provided under an arrangement, which stipulates the specific policies and measures a country has agreed to implement in order to resolve its balance of payments problem. [ The economic program underlying an arrangement is formulated by the country in consultation with the IMF, and is presented to the Funds Executive Board in a Letter of Intent. Once an arrangement is approved by the Board, the loan is released in phased installments as the program is carried out.
IMF Facilities: Over the years, the IMF has developed a number of loan instruments, or facilities; that are tailored to address the specific circumstances of its diverse membership. Low-income countries may borrow at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF). Non-concessional loans are provided through four main facilities. Stand-By Arrangements (SBA), the Extended Fund Facility (EFF), the Supplemental Reserve Facility (SRF), and the Compensatory Financing Facility (CFF). The IMF also provides emergency assistance to support recovery from natural disasters and conflicts, in some cases at concessional interest rates.
Except for the PRGF, all facilities are subject to the IMFs market-related interest rate, known as the rate of charge, and some carry an interest rate premium or surcharge. The rate of charge is based on the SDR interest rate, which is revised weekly to take account of changes in short-term interest rates in the major international money markets. The rate of charge was 3.39 percent as of February 28, 2005. Large loans carry a surcharge and must be repaid early if a countrys external position permits.
The amount that a country can borrow from the Fund its access limit varies depending on the type of loan, but is typically a multiple of the countrys IMF quota. ] (More)