Review of Facilities for Low-Income Countries - Supplement 1

Date: July 26, 2012
Electronic Access: Full Text

Summary:This supplement aims to assess the economic impact of the Fund’s support through its facilities for low-income countries (LICs). It relies on two complementary econometric analyses: the first investigates the longer-term impact of Fund engagement—primarily through successive medium-term programs under the Extended Credit Facility (ECF) and its predecessors (and more recently the Policy Support Instrument (PSI))—on economic growth and a range of other indicators and socio-economic outcomes; the second focuses on the role of IMF shock-related financing—through augmentations of ECF arrangements and short-term and emergency financing instruments—on short-term macroeconomic performance. The empirical results shed some light on two channels through which different Fund facilities may have helped LICs respond to the global financial crisis—(i) by supporting a gradual buildup of macroeconomic buffers in the decades prior to the crisis and (ii) by providing liquidity support at the height of the crisis. The combination of strong pre-crisis buffers and crisis financing allowed LICs to pursue counter-cyclical policy responses that preserved spending and facilitated a rapid recovery.

Series : Policy Paper
Subject(s): Fund facilities | Low-income developing countries | Use of Fund resources | Concessional aid | Access to Fund general resources | Conditionality | Extended Credit Facility | Policy Support Instrument | Precautionary and Liquidity Line | General Resources Account | Standby Credit Facility | Exogenous Shocks Facility | Emergency assistance | Stand-by arrangements | Extended Fund Facility | Rapid Credit Facility | Staff-monitored programs