IMF Lending
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Bibliographic details
- Published: December 5, 2022
- Last updated: April 2025
Overview
- The IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth.
- The IMF also provides precautionary financing to help prevent and insure against crises.
- IMF lending is continuously refined to meet countries’ changing needs.
- The factsheet was last updated in April 2025.
Why crises occur
- Causes are varied and can be domestic, external, or both.
- Domestic factors:
- Inappropriate fiscal and monetary policies, which can lead to large current account and fiscal deficits and high public debt levels.
- An exchange rate fixed at an inappropriate level, which can erode competitiveness and result in the loss of official reserves.
- A weak financial system, which can create economic booms and busts.
- Political instability and weak institutions.
- External factors:
- Shocks ranging from natural disasters to large swings in commodity prices.
- Sudden changes in market sentiment with globalization, causing capital flow volatility.
- The COVID-19 pandemic cited as an example of an external shock; the IMF responded with unprecedented financial assistance.
- Forms of crisis:
- Balance of payment problems: unable to pay for essential imports or service external debt.
- Financial crises: illiquid or insolvent financial institutions.
- Fiscal crises: excessive deficits and debt.
- Crises often involve multiple, interacting problems that can slow growth, increase unemployment, lower incomes, and lead to deep recessions; in acute crises, defaults or restructuring of sovereign debt may be unavoidable.
How IMF lending helps
- Provides breathing room to adjust policies in an orderly manner, facilitating a more gradual adjustment than would occur without timely financing.
- Signals that appropriate policies are being implemented, encouraging return of private investors.
- Aims to protect the most vulnerable via policy conditionality.
- In low-income countries, IMF lending is typically meant to catalyze financial support from other donors and development partners.
- The lending process is flexible:
- Countries committed to sound policies may access resources with no or limited conditionality.
- Certain urgent needs can be covered by emergency financing instruments with limited conditionality.
IMF lending process (typical sequence)
- 1. A member country in need of financial support makes a request to the IMF.
- 2. Country authorities and IMF staff discuss the economic and financial situation and financing needs.
- 3. A staff-level agreement (SLA) outlines the terms of a financial program or review; it is not final until approved by the IMF Executive Board. Policy conditionality is typically integral to IMF lending.
- 4. The policy program is presented to the IMF’s Executive Board in a “Letter of Intent” and detailed in a “Memorandum of Understanding.” The IMF staff recommends endorsement and financing. The process can be expedited under the IMF’s Emergency Financing Mechanism.
- 5. After Executive Board approval, the IMF monitors implementation of policy actions. Repayment ensures funds can be made available to other members.
IMF lending instruments (purpose, facility, financing, duration, conditionality)
- General notes:
- IMF members access the General Resources Account (GRA) on non-concessional terms (market-based interest rates).
- Concessional support (currently at zero interest rates) is provided through the Poverty Reduction and Growth Trust (PRGT).
- The Resilience and Sustainability Trust (RST) offers longer-term financing to low-income and vulnerable middle-income countries at affordable interest rates.
- GRA-supported programs are expected to resolve balance of payments problems during the program period; PRGT programs envisage a longer duration. The RST addresses longer-term challenges including climate change and pandemic preparedness.
- Present, prospective, or potential balance of payments need
- Facility: SBA
- Financing: GRA
- Duration: Up to 3 years but usually 12-18 months
- Conditionality: Ex-post, and ex-ante (prior actions) if needed
- Present, prospective, or potential balance of payments need
- Facility: SCF
- Financing: PRGT
- Duration: 1 to 3 years
- Conditionality: (not specified in table)
- Protracted balance of payments need / medium-term assistance
- Facility: EFF
- Financing: GRA
- Duration: Up to 4 years
- Conditionality: Ex-post, with focus on structural reforms, and ex-ante (prior actions) if needed
- Protracted balance of payments need / medium-term assistance
- Facility: ECF
- Financing: PRGT
- Duration: 3 to 4 years, extendable to 5 years
- Conditionality: (not specified in table)
- Urgent balance of payments need / emergency financing assistance
- Facility: RFI
- Financing: GRA
- Duration: Outright purchase
- Conditionality: No reviews / ex-post conditionality, but ex-ante (prior actions) possible
- Urgent balance of payments need / emergency financing assistance
- Facility: RCF
- Financing: PRGT
- Duration: Outright disbursement
- Conditionality: (not specified in table)
- Present, prospective, or potential balance of payments need (very strong fundamentals and policies)
- Facility: FCL
- Financing: GRA
- Duration: 1 or 2-year
- Conditionality: Ex-ante (qualification criteria) and annual reviews for the 2-year arrangements
- Potential moderate short-term balance of payments needs arising due to capital account pressures (very strong fundamentals and policies)
- Facility: SLL
- Financing: GRA
- Duration: Approved for a period of 12 months with successor SLLs possible
- Conditionality: Ex-ante (qualification criteria)
- Present, prospective, or potential balance of payments need (sound fundamentals and policies)
- Facility: PLL
- Financing: GRA
- Duration: 6-month (liquidity window) or 1 or 2-year
- Conditionality: Ex-ante (qualification criteria) and ex-post
- Longer-term prospective balance of payments need or balance of payments need created with policies
- Facility: RSF
- Financing: RST
- Duration: Minimum duration 18 months, cannot exceed the concurrent UCT-quality program
- Conditionality: Ex-post, concurrent IMF UCT-quality program required
- Non-financial / signaling instruments
- Facility: SMP1 (incl. PMB)
- Financing: NA
- Duration: 6 to 18 months, longer durations not precluded
- Conditionality: Ex-post, and ex-ante (prior actions) if needed
- Non-financial / signaling instruments
- Facility: PCI
- Financing: NA
- Duration: 6 months to 4 years
- Conditionality: Ex-post, and ex-ante (prior actions) if needed
Does the IMF charge for its loans?
- All IMF members have access to financial support through the GRA, which is subject to various charges designed to cover operational costs.
- Basic charges:
- Based on the market-determined Special Drawing Rights (SDR) interest rate – which has a minimum floor of 5 basis points – plus a margin established by the IMF Executive Board every two years (currently 60 basis points).
- Surcharges:
- Level-based surcharges: 200 basis points are applied on the portion of GRA credit outstanding greater than 300 percent of quota.
- Time-based surcharges: 75 basis points are applied on the portion of credit exceeding the level-based threshold for more than 36 months (51 months in case of borrowings under the Extended Fund Facility (EFF)).
- Commitment fee:
- Applied to the undisbursed portion of a loan; typically a small percentage of the loan amount.
- For most IMF lending instruments, levied at the beginning of each 12-month period on amounts that could be drawn in the period:
- 15 basis points for committed amounts up to 200 percent of quota;
- 30 basis points on committed amounts above 200 percent and up to 600 percent of quota;
- 60 basis points on amounts exceeding 600 percent of quota.
- Commitment fees are refunded to the borrowing member, in proportion to the drawings made. If a country borrows the entire amount, the fee is fully refunded.
- Additional commitment fees and/or refunds may apply under certain circumstances (e.g., whenever arrangements access amounts or periods are increased or decreased or cancelled).
- Service charge:
- A fixed charge on each amount drawn from the GRA (currently at 50 basis points, except for the Short-term Liquidity Line (SLL) which has a reduced rate of 21 basis points).
- Policy note:
- In line with the 2024 Review of Charges and the Surcharge Policy, IMF staff is expected to provide granular projections of the cost of Fund borrowing and capacity to repay during discussions on new GRA-financed IMF-supported programs.
PRGT and RST specifics, and recent reforms
- PRGT:
- Concessional financial support (currently at zero interest rates) through the Poverty Reduction and Growth Trust is tailored to low-income countries.
- 2024 Review Of The Poverty Reduction And Growth Trust Facilities And Financing — Reform Proposals updated facilities and financing terms available to LICs.
- Effective January 1, 2025:
- The access norm guiding the level of access for ECF and SCF arrangements is set at 145 percent of quota.
- Access limits remain at 200 percent of quota annually, and 600 percent of quota in total (maintaining higher levels decided as a temporary measure for 12 months by the Board in December 2023).
- The space between the norm and the limits provides flexibility for countries with higher needs.
- Safeguards were strengthened and streamlined, centered around the access norm and reflecting risks associated with higher PRGT credit exposure and elevated macroeconomic vulnerabilities in many LICs.
- Effective May 1, 2025:
- A new interest rate mechanism will apply to new PRGT lending.
- Outstanding credit under financing approved before that date, and new disbursements under existing arrangements (including potential augmentation of access), will remain subject to the current zero interest rate.
- The new mechanism will set interest rates at zero for the poorest PRGT-eligible members (around half of all LICs), and modest, but still concessional, interest rates for the others.
- RST:
- The Resilience and Sustainability Trust offers longer-term financing to low-income and vulnerable middle-income countries seeking to build resilience to external shocks at affordable interest rates.
- The RST provides financing to address longer-term challenges, including climate change and pandemic preparedness.
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