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1. The Compensatory Financing Facility (CFF) was established in 1963 to help countries cope with temporary exogenous shocks affecting export earnings without resorting to undue and unnecessary adjustment. Once eligibility has been established and access determined (based on the size of the shock and an assessment of the member's past and future cooperation with the Fund), a purchase is made available with no further conditions attached. Coverage was expanded in 1979 to include shortfalls in receipts from tourism and workers' remittances, and again in 1981 to include excess cereal import costs. 2. The Compensatory and Contingency Financing Facility (CCFF) was created in 1988 with the integration of the CFF and the new external contingency mechanism (ECM).1 An ECM is a mechanism attached to a Fund arrangement that provides additional resources in the event certain critical external variables (e.g., export prices or foreign interest rates) depart from the assumptions of the program. Whereas the CFF was intended to address deviations in specific current account variables from past trends, the ECM was designed to address deviations of a broader number of current account variables from program assumptions. 3. The CFF itself underwent further modifications around the turn of the decade, and refinements were made to the ECM in the first few years of its existence. The modalities and access limits for the CFF were comprehensively revised in 1988. The coverage of the export element of the CFF was further expanded in 1990 to include all services and income (except investment income).2 The ECM was modified in 1990 and 1992, mostly in an effort to simplify its operations and to increase its usefulness to members. 4. The Buffer Stock Financing Facility (BSFF) was established in 1969 to provide financial assistance to members with a temporary balance of payments need arising from contributions to buffer stocks established under approved international commodity agreements. No member has used the BSFF since 1984, and all commodity agreements for which BSFF eligibility has been approved have expired. The only existing agreement that could become eligible for BSFF support is the 1995 International Natural Rubber Agreement (which entered into force in 1997), but that agreement has not been approved for eligibility by the Board3 5. This paper provides a brief overview of the experience with the CCFF and BSFF and explores different options for the two facilities.4 It concludes that there is a case for eliminating the ECM and the BSFF, reflecting the fact that these facilities are no longer used and the same objectives can be better achieved by using other existing facilities. The paper also argues that, reflecting both changes in the world economy and difficulties in implementation, there is a case for elimination or at least substantial modification of certain features of the CFF. 6. On previous occasions when the CCFF and BSFF have been discussed, Directors have expressed concern in a number of areas. During the last CCFF review (in January 1993), Directors were troubled by the element of judgment involved in assessing the degree of cooperation with the Fund, which determines access to compensatory financing (a concern that has resurfaced regularly since). Many Directors also emphasized the desirability of simplifying the facility, and most endorsed the view that more experience should be gained before deciding whether a substantial modification of the facility would be appropriate. During the Executive Board meeting to approve BSFF eligibility for the 1987 International Rubber Agreement, some Directors questioned the wisdom of retaining the facility when only one commodity agreement was eligible, and questioned the principle of market intervention embedded in commodity agreements.5 7. This paper deals with the CFF, ECM, and BSFF in turn (Sections II-IV), issues for discussion are summarized in Section V. II. THE COMPENSATORY ELEMENT OF THE CCFF 8. The compensatory element of the CCFF (the CFF) is designed to provide compensation to member countries experiencing shortfalls in export earnings and/or excesses in cereal import costs (Box 1). The eligibility criteria require that the shortfall/excess be temporary and stem from factors beyond the authorities' control, and that the member have a balance of payments need. In addition, where the member is experiencing balance of payments difficulties beyond the effects of the temporary shortfall/excess, the member is expected to cooperate with the Fund in an effort to address them. The export shortfall (cereal import excess) is calculated as the amount by which a member's export earnings (cereal import costs) for a 12-month period are below (above) their medium-term trend.6,7 Various other provisions of the facility ensure that requests for compensatory financing are met in a timely fashion, in particular that a request cannot be made later than six months after the end of the shortfall year, and, in cases where the authorities foresee a shock, that the calculation for the shortfall year may include up to 12 months of estimated data.
9. In order to minimize risks associated with the lack of phasing in CFF purchases, a complex system of access limits and sublimits has been developed.8 The limits are related to a member's balance of payments position, track record of cooperation with the Fund, and whether or not there is an economic program that would meet the standards of an upper credit tranche arrangement (Table 1). Maximum access is available if the export shortfall or cereal import excess is the only cause of the balance of payments difficulty and the member is judged to have no need for adjustment. In such a case, the member is eligible for access of up to 55 percent of quota.9 In cases where there are balance of payments difficulties beyond those related to the shortfall/excess, access limits are lower. Depending on both the member's record of past cooperation and the expectation of future cooperation (the latter related in part to the existence of a program meeting the standards of upper credit tranche conditionality), access limits range from 10 percent to 45 percent of quota. In addition, actual access may be set below the applicable access limits where warranted by a member's capacity to repay the Fund.10 Table 1. Access Limits and Cooperation Requirements for Compensatory Financing
Balance of Payments Difficulties Extend Beyond Export Shortfall and
B. Experience with the Compensatory Element 10. This section provides a brief summary of experience since the CFF was extensively modified in 1988, by way of background to the discussion of some fundamental issues in the next section. The Annex provides tables on purchases under the CFF and a short summary of experience since the modifications to the CFF introduced at the time of the last review in 1993.11. Since 1989, 28 members (or about 16 percent of the Fund's average membership over the period) have made 45 purchases under the CFF (amounting to SDR 8.4 billion).11 After declining steadily during the 1980s, there was a sharp jump in use of the facility in 1991 (when the oil element was temporarily activated in the context of the Gulf War and there were 18 requests). In 1992 use of the facility fell back, and between 1995-1998 there was only one request a year. In 1999, thus far, requests have picked up slightly to five. 12. About three quarters of the countries that made purchases (20 out of 28) were middle-income, and a similar proportion of the purchases (32 out of 45) were made in conjunction with upper credit tranche stand-by or extended arrangements (either pre-existing or concurrently approved).12 Of the thirteen purchases that were not made in immediate association with upper credit tranche arrangements, only seven were complete "stand-alone"13; the other six were either associated with arrangements in the first credit tranche, under the Structural Adjustment Facility or under the Enhanced Structural Adjustment Facility, or preceded the approval of an upper credit tranche arrangement by only a few weeks (Table 2). Most cases concerned members whose record of cooperation was deemed to be satisfactory; there were only five cases in which past cooperation was judged not to be satisfactory'in four of these five cases, upper credit tranche stand-by arrangements were put in place at the time of the CFF request. In no case was the shortfall/excess deemed to be the member's only balance of payments difficulty. Table 2. Categorizations of Requests for CCFF Financing: January 1989 - September 1999
Previous Record of Cooperation Not Satisfactory
13. In a number of cases, the staff has recommended and the Board has agreed, that a member should not draw the entire amount of additional resources that might be available to it under the CFF--at least not all at once. Access was set below the applicable access limit on capacity to repay grounds (Algeria 1994); access under existing concurrent arrangements was rephased in light of the purchase under the CFF (Azerbaijan 1999, Pakistan 1999); and an existing extended arrangement was augmented in lieu of a purchase under the CFF (Ukraine 1999). C. The Rationale for Compensatory Financing 14. The case for low- or relatively low-conditionality financing of temporary exogenous balance of payments shocks through the CFF rests on three premises: (i) the appropriate response to the temporary shock consists of timely financing rather than adjustment (otherwise, higher conditionality—with phasing of resources—would be appropriate); (ii) members have little or no access to alternative sources of financing (otherwise, they could turn to these, instead of being forced into excessive and unnecessary adjustment); and (iii) other Fund facilities are not suited for this purpose. Doubts about these premises have been raised since before the CFF's establishment (see Box 2), but the Board has thus far considered that the balance of arguments favored retaining the CFF. Developments over the last decade, however, and in particular the evolving nature of the membership and of the global economy, argue for a revisiting of this balance. The following paragraphs discuss each of these premises in turn. 15. First, there are several reasons why the appropriate response to a CFF-type shock may not consist entirely of financing. i. In practice it is difficult to distinguish between temporary and permanent shocks, and even those that could be clearly considered temporary may be less common than was supposed in the past. While fluctuations in the prices of primary commodities were a major concern in the 1950s and the ensuing decades, at least since the 1980s secular trends in these prices have seemed to become more important, and evidence has accumulated that commodity price shocks typically do not reverse quickly.14 This suggests that the proper response to a commodity price shock should involve adjustment as well as financing. This in turn suggests that the appropriate context of the associated CFF-like financing would be an arrangement under which the required adjustment could be monitored and purchases subject to related conditionality, rather than in the form of an outright purchase outside the context of an arrangement and without the application of conditionality linked to the adjustment program.
ii. Experience suggests that few countries have "ideal" policies. Even in cases where good policies are being implemented, some policy response might still be required in the presence of exogenous shocks that are identifiable and transitory. This is particularly so over the medium term, to ensure that the CFF resources are repaid. In the absence of adjustment (or a positive balance of payments shock), further balance of payments problems may arise when it is time for the member to make repurchases. This problem has been of concern to the staff and the Board since the discussions that led up to the creation of the CFF.15 Indeed, recognition that it was rare in practice for a country to have an exogenous and temporary export shortfall without also having a more persistent balance of payments problem was the main reason why CFF conditionality was tightened in the 1980s and why the complex system of access limits under the facility evolved. It is notable in this respect that no country has been judged under the CFF to have a balance of payments problem limited exclusively to the effect of a temporary export or cereal import shock since the early 1980s, and that the great majority of purchases under the CFF have taken place in conjunction with arrangements. These considerations would suggest that "stand-alone" CFFs would be suitable only for circumstances —where there is no need for adjustment—which are, in practical terms, unlikely to hold. iii. There may be a problem of adverse selection. Availability of relatively unconditional upfront disbursements of CFF resources may bias use of the CFF—on a"stand-alone"basis—toward countries that are not prepared to pursue necessary adjustment programs. 16. Second, a growing number of members have access to international capital markets during normal times. A stylized classification of potential users of Fund resources might now involve two groups: middle-income members with access to capital markets, and low income members with limited access. It is perhaps the latter group that has the most potential need for compensatory financing (both because they have little access to private sources of finance, and because they may be more exposed to exogenous current account shocks). Yet the terms that apply to the CFF may not be appropriate for these members, and indeed it is, by and large, middle-income member countries that have been using the CFF in its current form. Members with access to capital markets may opt to use CFF resources simply because the costs are lower than market financing, and in such cases financing under the CFF would substitute for market financing for at least part of the shock. 17. Third, alternative means to satisfy the need for compensatory financing exist within the collection of Fund facilities. As was recognized in the runup to the creation of the CFF, stand-by arrangements (and augmentations thereof) are available for any kind of balance of payments problem; these offer the advantage not only that conditionality can be applied (see above), but also that the phasing of purchases can be matched to the evolution of the balance of payments need over time. And in the (likely rare) instances where adjustment and conditionality are not deemed necessary, resources can still be provided in the form of the first credit tranche (if available), emergency assistance (under the relevant conditions), or outright purchases. Two developments in the last decade or so have added further weight to the view that compensatory financing could be provided just as (or more) effectively by other means: i. Many of the low-income countries that have suffered droughts or commodity price shocks that have generated export shortfalls or cereal import excesses have, since the creation of the ESAF in 1987, had ESAF arrangements in support of adjustment and reform programs either in place or close to approval at the time of the shock. As part of the assessment of overall balance of payments need, financing for such shocks could thereby be provided on more appropriate terms to such countries through the ESAF. ii. The Fund can now respond rapidly to requests for arrangements, reflecting in part, the development of emergency procedures.16 This aspect of early motivations for a CFF—namely, the desire for an instrument that would allow the Fund to respond quickly to current account shocks—may have become less relevant. 18. Of the above three considerations (the need for adjustment and conditionality, the availability of alternative finance, and the existence of other Fund facilities), it is the first that has proved the most troubling, as was recognized during previous efforts to reform the CFF. While the procedure of linking access to the quality of past cooperation and the strength of members' policies may help secure an appropriate ex ante policy stance, it does not, absent follow-up conditionality, provide much assurance that envisaged policies will be implemented. Moreover, Directors have, over various cases, often expressed discomfort with having to make these difficult judgements about cooperation and strength of policies, especially when such judgements must be made outside the context of an arrangement (which would otherwise provide a yardstick regarding the strength of policies and a basis for continuing conditionality). Difficult judgements of this nature must also be made by the staff in bringing requests for access to the CFF to the Executive Board and in recommending approval. For"stand-alone"requests, too much may depend on the staff's judgement on whether the member will, or will not, carry out envisaged policies. This in turn makes it difficult to ensure equality of treatment for the membership. When CFF financing is being supplied in the context of an arrangement, the member can to some extent be given the benefit of the doubt, since the application of conditionality should help ensure follow-through. Even when CFF financing is provided in the context of an arrangement, however, there can be problems if the purchase under the CFF is large in relation to access under the arrangement, since this may distort the pattern of access during the arrangement and effectively weaken its conditionality. These considerations raise questions about (i) the suitability of "stand-alone" access to the CFF, in particular, and (ii) the lack of phasing of purchases under the CFF generally. D. Options 19. The above discussion points to significant problems with the present construction of the CFF. Shortfalls and excesses have typically been experienced against the background of wider balance of payments problems and adjustment needs. The relatively low conditionality associated with the facility creates risks, and attempts to mitigate these risks have made the facility complex and difficult to understand and administer. The kind of shocks for which the CFF was designed may not be as reversible and temporary as was once assumed. The availability of concessional resources in the Fund appears to have reduced the interest in the CFF of those for whom it was perhaps most potentially relevant. And with wider access to capital markets, the provision of financing under the CFF may have begun to serve primarily to substitute for recourse to alternative sources of finance, rather than forestalling excessive adjustment. 20. In view of the above, one option would be to simply eliminate the CFF and seek to provide equivalent financing, as needed and where appropriate, under stand-by, extended or ESAF/PRGF arrangements (either upon approval or through their augmentation). However, although this would have the advantage of ensuring that compensatory financing was provided only in conjunction with adjustment programs, elimination of the CFF would create a number of practical problems. First, it would mean that, overall, limits on potential access to Fund resources would be effectively reduced, as CFF access "floats" as regards the limits on access under other facilities and policies. While it would be possible to raise the access limits under the credit tranches (CT) and the Extended Fund Facility (EFF) to levels currently implied by the combined CT/EFF and CFF access limits, this would risk bringing with it an unintended upward drift in access across the board. Second, in cases where an extended arrangement is in place, substituting access to the CFF with augmentation of the EFF would result in a significant lengthening of the repurchase period, which would seem inappropriate since there would be no reason to suppose that external shocks should generally be of longer duration for members with EFFs than for members with stand-by arrangements.17 Third, elimination of the CFF would also remove an objective criterion for calculating compensable export shortfalls and cereal import excesses. While the methodology is not without scope for improvement, it does help remove an unnecessary element of arbitrariness in judging access. 21. Another option would to retain the CFF, but limit "stand-alone" access to the CFF to those cases in which the member's balance of payments position, apart from the temporary export shortfall and/or cereal import excess, is satisfactory.18 In all other cases, access to the CFF would be provided only in the context of arrangements.19 This would have the virtue of associating access to the CFF for all members whose balance of payments problems extend beyond those of the temporary export shortfall and/or cereal import excess with the conditionality attached to the resources of the underlying arrangement, while avoiding the problems that would otherwise result from elimination of the CFF. The link to the conditionality of the underlying arrangement could also be strengthened by introducing provision for the phasing of purchases under the CFF, making them subject to performance criteria under the arrangement (Box 3). Confinement of access to the CFF to arrangements for these cases would also create an opportunity to greatly simplify the system of access limits. Much of the complexity of these limits derives from the efforts to discriminate between differing degrees of cooperation in determining eligibility under the CFF. If the CFF were available only in the context of an arrangement for these cases, there would be no need to make independent judgments about the member's past and future cooperation, since this standard would be set by the arrangement and the policy commitments under it. This would permit the six sets of limits currently specified under the CFF to be collapsed into only two sets. Based on the current limits under the CFF: (i) "stand-alone" cases would continue to be subject to the maximum limits that already apply for these cases, i.e., 45 percent of quota for export shortfalls, 45 percent of quota for cereal import excesses and a joint limit of 55 percent of quota; and (ii) all other cases would be in the context of arrangements and would be subject to a single set (rather than five sets) of limits of 35 percent of quota for export shortfalls, 25 percent of quota for cereal import excesses, and a joint limit of 45 percent of quota. Table A illustrates these changes in access limits. There does not, however, seem to be a clear reason why there should be two different sets of access limits for "stand-alone" CFF access and for CFF access in the context of arrangements, since financing under both situations is aimed at the same problem (an export shortfall and/or cereal import excess). Accordingly, and in the spirit of simplification called for in Fund facilities, it is for consideration whether to adopt a single set of access limits for both cases of, say, 45 percent of quota for export shortfalls, 45 percent for cereal import excesses and a joint limit of 55 percent of quota.
22. If it were decided to continue with the CFF, either as confined to arrangements--as is proposed--or as it is now, there remain a few technical issues that merit re-examination. These issues could be taken up in a short follow-up paper. III. THE CONTINGENCY ELEMENT OF THE CCFF 23. The purpose of the ECM is to provide members pursuing policies supported by Fund arrangements with an ex ante commitment of Fund financial support in the event of an exogenous current account shock. While compensatory financing was intended to address deviations in certain current account variables from past trends, contingency financing under the ECM was designed to address deviations from a program's baseline assumptions for such variables. ECMs are intended to provide for a combination of adjustment and financing in the face of unexpected developments in prespecified current account variables that are beyond the control of the authorities (Box 4). 24. The ECM has been used very rarely and not at all in the last six years. Since its inception in 1988, ECMs have been attached to only 11 Fund-supported arrangements. Eight of these cases were arrangements approved during 1991 and 1992. In only one case has a drawing under the ECM ever been made (Bulgaria in 1992, for SDR 57 million). The last case of an arrangement including an ECM was Hungary in 1992, and the mechanism was not triggered (Table B). 25. The complexity and rigidity of the operations governing the contingency element have made it difficult to understand and to use effectively. While the notion of pre-specifying the response to contingent developments is appealing, the special role played by key variables in determining the baseline forecast has made discussions with the authorities more complicated . Furthermore, the symmetry provisions imbedded in ECMs constrain the authorities to accumulate reserves in the event of better than expected current account outcomes, reducing the overall attractiveness of the mechanism. 26. The rare use of ECMs also reflects the availability of other mechanisms to achieve the same objectives, in particular via the use of (i) program adjusters to prevent interruptions to purchases from unexpected changes to program parameters, (ii) program augmentations to increase Fund support if appropriate, and (iii) access to the CFF.20 In addition, the establishment of emergency procedures and the demonstrated capability of the Fund to respond rapidly has meant that members are assured that Fund financial support can be in place relatively quickly when needed.
27. Previous attempts to simplify ECMs have failed to elicit interest on the part of members. The CCFF reviews of 1990 and 1992 sought to streamline the rules governing the contingency element. While further such attempts could be considered, the staff does not believe that another exercise of this type would represent an efficient use of staff or Board resources. As noted, the main objective of contingency financing can be achieved with a combination of program adjusters and augmentations as well as, perhaps, with continued use of a (modified) CFF. 28. In this light, the staff recommends elimination of the contingency element of the CCFF. 29. The BSFF has been dormant for the last 15 years.21 All of the 39 purchases made during its 30-year existence (amounting to SDR 0.56 billion) took place in the first 15 years of the facility (i.e., between 1969 and 1984). Since the last BSFF review was completed in June 1983, there have been five purchases for a total of SDR 102 million (by Brazil, Dominican Republic, Cote d'Ivoire, Thailand, and Zimbabwe, mostly to cover contributions under the 1977 International Sugar Agreement); all of these purchases were made within eight months of the 1983 review (Table C).
30. There are currently no commodity agreements for which BSFF eligibility has been approved, and only one (the 1995 International Rubber Agreement) for which eligibility could potentially be approved. The latter includes only a limited number of member countries, and two of the three largest producers have officially announced their decision to leave the supporting commodity organization. 31. Buffer stocks have proved to be ineffective in stabilizing prices. At the time of the creation of the facility, buffer stocks were perceived to be a way of reducing price volatility and ameliorating the detrimental effect of depressed commodity prices. However, the experience has been that attempts to stabilize commodity prices by means of buffer stock arrangements have met with little success, and that the modest price stabilization achieved in practice has typically been outweighed by the interest and carrying costs of the buffer stock. 32. Moreover, difficulties in covering small contributions to buffer stocks--leading to a balance of payments "need" for use of Fund resources--could be an indication of more serious balance of payments problems. In those cases where a problem exists, the financing needs of the member country would be better addressed through a Fund-supported program under the regular facilities.
33. In view of the above considerations, the staff recommends the elimination of the BSFF. 34. The Board may wish to focus on the following issues: (i) whether the BSFF should be eliminated;
(ii) whether the contingency element of the CCFF should be eliminated; and (iii) whether the compensatory element of the CCFF should be either: (a) eliminated or,
(b) limited to cases where a stand-by arrangement, extended arrangement or ESAF is in place, subject to substantially simplified access limits, and phased (except where the member's balance of payments position is satisfactory apart from the temporary export shortfall or cereal import excess, in which case "stand-alone" access would remain available). 35. Draft decisions will be prepared as appropriate in light of the discussion of this paper.
1This paper uses the old term "CFF" for the compensatory element of the CCFF, and the term "ECM" for the contingency element. 2Also in 1990, a temporary oil import element was introduced to compensate for increases in fuel import costs during the Gulf War; it was discontinued at end-1991. 3The Fund has been asked by the International Natural Rubber Organization to make a determination regarding the eligibility of this agreement for BSFF support. A response will be prepared once the present review has been completed by the Board. 4The last review of the CCFF was conducted in January 1993 (EBS/92/201 and Supplement 1). The last review of the BSFF took place in the context of the review of the cereal import element of the CFF in June 1983 (SM/83/131). 5Executive Board meeting of April 4, 1990 (EBM/90/53), which approved the eligibility of the 1987 International Rubber Agreement (SM/90/40). 6An excess in cereal import costs may be compensated only to the extent that it is not offset by an excess in export earnings. 7For exports, the medium-term trend is determined by the five-year geometric average centered on the shortfall year. For cereal imports it is the arithmetic five-year average centered on the excess year. Export trends are calculated using geometric averages because the nominal value of exports is believed to follow a geometric curve more closely than an arithmetic curve (see Compensatory Financing Facility, L.M.Goreux, IMF Pamphlet No. 34, 1980). An arithmetic average is used for cereal imports (in place of geometric), on the other hand, because cereal imports in any one year may sometimes be zero (which would result in a spurious geometric average of zero, irrespective of positive import values in other years). 8Purchases are phased only if nine or more months of estimated data are used for the shortfall year, in which case compensation is provided in two tranches, the first of which is 65 percent of the total compensable amount. 9Access limits were reduced, in relation to quota, when the Eleventh Review of Quotas entered into effect in early 1999, in such a way as to keep average access in SDR terms unchanged. 10The CFF "floats" relative to the credit tranches as regards access, but not as regards conditionality. That is, access to the CFF does not count toward the access limits in the credit tranches but it counts toward use of the first credit tranche for purposes of conditionality. This means that, while a member using the CFF would still have access to the first credit tranche, resources under it would become subject to phasing. 11Although the modifications to the CFF entered into force in 1988, purchases under the new guidelines did not begin until early 1989. Over the entire 36-year period since the introduction of the original CFF in 1963, 106 countries have made 343 drawings under the CFF for SDR 25.3 billion. 12Two drawings were made in conjunction with a combined extended/ESAF arrangement. 13India (1991); Israel (1992); Moldova (1993); Ghana (1993); South Africa (1993); Rwanda (1995); and Algeria (1999). 14See, for instance, Cashin, Paul, Hong Liang and John C. McDermott, 1999, "How Persistent are Shocks to World Commodity Prices" (IMF Working Paper WP/99/80), who find that for the majority of individual commodities it typically takes more than five years for one half of the initial price shock to reverse. 15See, for instance, "Fund Policies and Procedures in Relation to Compensatory Financing of Commodity Fluctuations" (reproduced in IMF Staff Papers, VIII (1960-61), pages 1-76). This report, the first on the possibility of a compensatory facility, emphasized that there could not be automatic access to the Fund's resources in the event of an export shortfall because the country's balance of payments situation as a whole had to be taken into account. 16"Emergency Financing Mechanism—Summing Up by the Chairman", EBM/95/85, September 12, 1995. 17The relatively long repurchase maturities of the EFF were intended for balance of payments problems of a more protracted nature. 18This case is currently provided for under paragraphs 12(c) and 31(d) of the CCFF decision. The Operational Guidelines (SM/93/147) elaborate that this case "would typically be an economy with a strong external position, adversely affected by exogenous and quickly reversible shocks like a temporary decline in world prices or a drought. The shortfall is considered to be self-correcting and no fundamental change in economic policy would be warranted." 19Eligible arrangements would include stand-by arrangements, extended arrangements and ESAF/PRGF arrangements 20The coverage and flexibility of the ECM is only slightly broader than the CFF. The CFF covers aggregate exports and imports of cereals, whereas there is scope under the ECM to break both imports and exports into subcomponents as well as include (up to a sub-limit) interest payments. The CFF relates compensation to deviations from trend, while the ECM works off deviations from agreed baseline assumptions. 21The modalities of the BSFF are described in Box 5. |
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