Page 187 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes of its quota under this head. The member has to cooperate with the Fund in establishing
prices of commodities within the country. Repurchases are made between 3 ¼ years and 5
years.
2. Extended Fund Facility (EFF): The facility was created in 1974. The credit under EFF is
provided to meet the balance of payments deficits. The amounts provided under EFF
are larger than member’s quota under normal credit facilities. This facility is provided
for a maximum period of 10 years. The amount of loan under EFF is allowed up to 300
per cent of member’s quota. The sanction is based on performance criteria and drawings
installments.
3. Supplementary Financing Facility (SFF): In 1977, another facility called SFF was created
to provide supplementary financing under extended or stand-by arrangements. The
main purpose of SFF was to provide funds to member countries to meet serious balance
of payments deficits which are large in relation to their economies and their quotas.
This facility was extended to low income developing member countries also. The Fund
established a Subsidy Account in 1980 to reduce the cost of borrowing under SFF to such
low income developing countries. Subsidy Account means an account through which Fund
makes subsidy payment to borrower countries.
4. Structural Adjustment Facility (SAF): It was established in March 1986. The main
purpose of SAF was to provide concessions to carry out medium term macro-economic
and structural adjustment programmes. The loans are also granted to them to solve their
balance of payments problems. The loans are made available to the poorer countries on
highly concessional terms. The rate of interest charged from them ranges between 0.5 to
1 per cent and the repayment period varies between 5 ½ to 10 years with a 5 year grace
period. Disbursements are made on annual basis and are linked to the approval of annual
arrangements with members receiving equivalent to 15% of their quota under the first,
20% under the second and 15% under the third annual arrangements. The SAF was created
with the resources of SDR 2.7 billion. The resources came mainly from repayments on loans
from the Trust Fund.
5. Enhanced Structural Adjustment Facility (ESAF): The ESAF was created in December 1987
with SDR 6 billion of resources. It was created to meet the medium-term financing needs
of low income countries. The ESAF has same objectives, eligibility and basic programmes
as are of SAF. The only difference among both is of the amount of assistance. The members
can receive up to 100 per cent of Quota over a 3 year programme period, with a provision
for up to 250 per cent in exceptional circumstances. Disbursements under the ESAF are
biannual instead of annual.
6. Compensatory and Contingency Financing Facility (CCFF): The CCFF was created in
August 1988. The main purpose of it was to provide timely compensation for temporary
shortfalls or increase in cereal import costs due to factors beyond the control of the members.
This facility was provided to a member to maintain the momentum of Fund-supported
adjustment programmes. In 1990, the Fund introduced an important element temporarily
to help members to come out of Gulf War Crisis. This was within 95 per cent of quota for
CCFF. It was also decided to expand the coverage of CCFF. Now, for the calculation of
export shortfalls, workers’ remittances and travel receipts, shortfalls in other services such
as receipts from pipelines, canals, shipping, transportation, construction and insurance,
etc., have also been included under compensatory financing.
7. Systematic Transformation Facility (STF): In April, 1993, STF was established with $6
billion to help Russia and other Central Asian Republics to face balance of payments
crisis.

8. Emergency Structural Adjustment Loans (ESAL): ESAL facility was established in early
1999 by the Fund to help the Asian and Latin American countries which were suffering

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