IMF Standby Credit Facility (SCF)

September 24, 2019

The Standby Credit Facility (SCF) provides financial assistance to low-income countries (LICs) with short-term balance of payments needs. The SCF was created under the Poverty Reduction and Growth Trust (PRGT) as part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of LICs, including in times of shocks or crisis.

Financial assistance tailored to country needs

Purpose. The SCF supports LICs that have reached broadly sustainable macroeconomic positions, but may experience episodic, short-term financing and adjustment needs, including those caused by shocks. The SCF supports countries’ economic programs aimed at achieving, maintaining, or restoring a stable and sustainable macroeconomic position consistent with strong and durable growth and poverty reduction. It also provides policy support and may help catalyze foreign aid. The SCF replaced the Exogenous Shocks Facility-High Access Component (ESF-HAC) effective January 2010.

Eligibility.The SCF is available to PRGT-eligible member countries facing an immediate or potential balance of payments need, where the country’s financing and adjustment needs are normally expected to be resolved within two years, but in any case not more than three years, thus establishing a sustainable macroeconomic position.

Duration and repeated use. An SCF arrangement can range from 12 to 36 months. As the SCF is intended to address episodic short-term needs, its use is limited to three out of any six years. Subject to these limits, an SCF arrangement may be extended or cancelled, and consecutive arrangements may be approved.

Access. Access to SCF financing is determined based on a country’s balance-of-payments need, the strength of its economic program and capacity to repay, the amount of outstanding Fund credit, and the member country’s track record of past use of Fund credit. The amount approved at the beginning of an arrangement may be augmented, subject to applicable access limits. Total access to concessional, or reduced-rate, financing under the PRGT is normally limited each year to 100 percent of a country’s quota, which broadly reflects its relative position in the global economy, and to 300 percent of its quota in total. Access can be higher in exceptional circumstances, with hard caps of 133.33 (annual) and 400 (cumulative) percent of quota.

Precautionary arrangementsA member country with a potential but not an immediate balance-of-payments need can treat SCF financing as precautionary, without drawing on it. SCF arrangements that are treated as precautionary do not count toward the time limit of three out of any six years.

Streamlined, focused conditionality

Under the SCF, member countries agree to implement a set of policies that will help them achieve a stable, sustainable macroeconomic position in the short term. These commitments, including specific conditions, are described in the country’s letter of intent. SCF arrangements with an initial duration exceeding two years require a Poverty Reduction and Growth Strategy (PRGS) to be issued to the Board for completion of the second and subsequent reviews. Arrangements with an initial duration of two years or less do not require a PRGS, but SCF-supported programs should be aligned with a country’s poverty reduction and growth objectives. 

Structural benchmarks help monitor progress with reforms that are macro-critical for program goals. These benchmarks vary across programs but could, for example, include measures to improve financial sector operations, build up social safety nets, or strengthen public financial management.

Program reviews by the IMF’s Executive Board play a critical role in assessing performance under the program and allowing the program to adapt to economic developments. Progress of the program, in particular against quantitative conditions and structural benchmarks, is assessed in the context of reviews. Reviews are scheduled at most six months apart.

Concessional lending terms

Financing under the SCF carries a zero interest rate at least through June 2021, with a grace period of four years and a final maturity of eight years. An availability fee is levied at 0.15 percent a year on the undrawn portion of the available amount during each six-month period. The Fund reviews the level of interest rates for concessional facilities under the PRGT every two years based on the PRGT interest rate mechanism, with the next review expected to be completed no later than end-June 2021.