IMF Extended Fund Facility (EFF)

June 5, 2020

When a country faces serious medium-term balance of payments problems because of structural weaknesses that require time to address, the IMF can assist through an Extended Fund Facility (EFF). Compared to assistance provided under the Stand-by Arrangement, assistance under an extended arrangement features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period.

What is the EFF designed for?

The EFF was established to provide assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position. An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.

Longer engagement and repayment periods 

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.

Extended arrangements are typically approved for periods of three years, but may be approved for periods as long as 4 years to implement deep and sustained structural reforms. Amounts drawn under an EFF are to be repaid over 4½–10 years in 12 equal semiannual installments. By contrast, credits under a Stand-By Arrangement (SBA) are repaid over 3¼–5 years.

Strong focus on structural adjustment

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, are expected to have a strong focus on structural reforms to address institutional or economic weaknesses, in addition to policies to maintain macroeconomic stability. The IMF’s Executive Board regularly assesses program performance and can adjust the program to adapt to economic developments.

How much can a country borrow and what is the cost?

As with other IMF lending, the size of borrowing under an EFF is guided by a country’s financing needs, capacity to repay, and track record with past use of IMF resources.

  • Normal access. Borrowing under an EFF is subject to the normal limit of 145 percent annually of a country’s IMF quota, (IMF quota broadly reflects a country’s position in the global economy), and a cumulative limit over the life of the program of 435 percent of its quota, net of scheduled repayments.
  • Exceptional access. The Fund may lend amounts exceeding these limits in exceptional circumstances provided that a country satisfies a predetermined set of criteria.

EFFs generally are not formulated on a precautionary basis in anticipation of a future balance of payments problem.

Commitment fee. Resources made available under an EFF are subject to a commitment fee levied at the beginning of each 12‑month period on amounts that could be drawn. These fees amount to 15 basis points, or 0.15 percentage point, for amounts up to 115 percent of quota; 30 basis points on amounts above 115 percent and up to 575 percent of quota; and 60 basis points on amounts exceeding 575 percent of quota. The fees are refunded if the amounts are drawn during the course of the relevant period, so if a country draws the entire amount committed under an EFF, the commitment fee is fully refunded.

Lending rate. The cost of borrowing is tied to the IMF’s market-related interest rate, known as the basic rate of charge, which is linked to the Fund’s Special Drawing Rights (SDR) interest rate. Currently, the basic rate of charge amounts to the SDR rate plus 100 basis points, or 1 percentage point. Large loans carry a surcharge of 200 basis points, paid on the amount of credit outstanding above 187.5 percent of quota. If credit remains above 187.5 percent of quota after 51 months, the surcharge rises to 300 basis points. The surcharges are designed to discourage large and prolonged use of IMF resources.

Service charge. A service charge of 50 basis points, or 0.5 percentage point, is applied on each amount drawn.