## Press Release: IMF Overhauls Lending Framework

_IMF News, March 24, 2009_

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**Canonical URL:** [Press Release: IMF Overhauls Lending Framework](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0985)

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## Bibliographic details
- Published: March 24, 2009

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### Overview
- Press Release No. 09/85 — March 24, 2009.
- Executive Board approved a major overhaul of the IMF’s lending framework, including creation of a new Flexible Credit Line (FCL).
- Key rationale: "More flexibility in our lending along with streamlined conditionality will help us respond effectively to the various needs of members." — Dominique Strauss-Kahn.
- Reform objectives include stronger crisis prevention and crisis resolution tools, streamlined conditionality, and increased lending capacity.

### Key reforms approved
- Modernizing IMF conditionality for all borrowers.
- Introducing a new Flexible Credit Line (FCL).
- Enhancing the flexibility of the Fund’s traditional stand-by arrangement (SBA).
- Doubling normal access limits for nonconcessional resources.
- Simplifying cost and maturity structures.
- Eliminating certain seldom-used facilities.
- Reforms of concessional lending instruments for low-income members are in train.
- Consulting with members to secure a sharp increase in lending resources.

### Modernizing conditionality
- Shift toward pre-set qualification criteria (ex-ante conditionality) where appropriate, embodied in the FCL.
- Structural policy implementation will be monitored through program reviews rather than structural performance criteria.
- Structural performance criteria will be discontinued in all Fund arrangements, including those with low-income countries.
- Monitoring approach aims to reduce stigma and eliminate need for formal waivers when structural reforms are not met by a specific date.

### Flexible Credit Line (FCL)
- New credit line for countries with very strong fundamentals, policies, and track records.
- Purpose: crisis prevention and resolution for very strong-performing members.
- Access features:
  - Large and upfront access to Fund resources with no ongoing (ex post) conditions.
  - Renewable credit line, initially for either a six-month period, or a 12-month period with a review of eligibility after six months.
  - Longer repayment period: "3¼ to 5 years" versus maximum rollover period of 9 months in the SLF.
  - No hard cap on access to Fund resources; access assessed case-by-case (the SLF had a cap on access of 500 percent of quota).
  - Flexibility to draw at any time or to treat it as a precautionary instrument (which was not allowed under the SLF).
- FCL replaces and strengthens the Short-Term Liquidity Facility (SLF), which is discontinued.
- Pre-set qualification criteria (core elements) include assessment of:
  - (i) a sustainable external position;
  - (ii) a capital account position dominated by private flows;
  - (iii) a track record of steady sovereign access to international capital markets at favorable terms;
  - (iv) a reserve position that is relatively comfortable when the FCL is requested on a precautionary basis;
  - (v) sound public finances, including a sustainable public debt position;
  - (vi) low and stable inflation, in the context of a sound monetary and exchange rate policy framework;
  - (vii) the absence of bank solvency problems that pose an immediate threat of a systemic banking crisis;
  - (viii) effective financial sector supervision;
  - (ix) data transparency and integrity.
- Strong performance against all criteria is not strictly necessary; compensating factors, including corrective policy measures under way, are considered.

### Enhancing Stand-by Arrangements (SBA)
- SBA reforms aim to increase flexibility and support crisis prevention for members not qualifying for the FCL.
- New SBA framework enables high-access on a precautionary basis.
- Provides increased flexibility by allowing frontloading of access and reducing the frequency of reviews and purchases where warranted by country policy strength and balance of payments needs.

### Doubling access limits and Exceptional Access
- Nonconcessional loan access limits doubled:
  - New annual access limit: 200 percent of quota.
  - New cumulative access limit: 600 percent of quota.
- Access above these limits continues under Exceptional Access procedures, which are being clarified and streamlined.

### Adapting and simplifying cost and maturity structures
- Elimination of the time-based repurchase expectations policy; replaced by a new time-based surcharge.
- Streamlined level-based surcharges introduced.
- Objective: mitigate credit and liquidity risks without increasing costs for countries that make timely repayments.
- New schedule of commitment fees increases with the size of precautionary lending to mitigate liquidity risks without discouraging early access.

### Reform of facilities for low-income members and toolkit simplification
- Structural conditionality reform applies to concessional loan facilities for low-income countries.
- Fund is considering modifications to concessional lending facilities to strengthen short-term and emergency financing tools for low-income countries.
- Facilities being eliminated (seldom used):
  - Supplemental Reserve Facility.
  - Compensatory Financing Facility.

### Boosting the Fund’s resources
- Need for substantial increase in IMF resources to meet expanded financing requirements.
- Japan has provided an additional US$100 billion to bolster lendable resources to about US$350 billion.
- European Union has committed €75 billion.
- Efforts underway to further increase IMF resources in the run-up to the April 2 London summit of the G-20, and to at least double concessional resources for low-income countries.

*Press Release No. 09/85 — March 24, 2009 — https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0985*

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0985_