Policy Papers

Review of Facilities for Low-Income Countries - Supplement 1

July 26, 2012

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Review of Facilities for Low-Income Countries - Supplement 1, (USA: International Monetary Fund, 0) accessed September 20, 2024

Summary

This supplement aims to assess the economic impact of the Fund’s support through its facilities for low-income countries (LICs). It relies on two complementary econometric analyses: the first investigates the longer-term impact of Fund engagement—primarily through successive medium-term programs under the Extended Credit Facility (ECF) and its predecessors (and more recently the Policy Support Instrument (PSI))—on economic growth and a range of other indicators and socio-economic outcomes; the second focuses on the role of IMF shock-related financing—through augmentations of ECF arrangements and short-term and emergency financing instruments—on short-term macroeconomic performance. The empirical results shed some light on two channels through which different Fund facilities may have helped LICs respond to the global financial crisis—(i) by supporting a gradual buildup of macroeconomic buffers in the decades prior to the crisis and (ii) by providing liquidity support at the height of the crisis. The combination of strong pre-crisis buffers and crisis financing allowed LICs to pursue counter-cyclical policy responses that preserved spending and facilitated a rapid recovery.

Subject: Access to Fund general resources, Concessional aid, Conditionality, Emergency assistance, Exogenous Shocks Facility, Extended Credit Facility, Extended Fund Facility, Fund facilities, General Resources Account, Low-income developing countries, Policy Support Instrument, Precautionary and Liquidity Line, Rapid Credit Facility, Staff-monitored programs, Stand-by arrangements, Standby Credit Facility, Use of Fund resources

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