IMF Standby Credit
March 19, 2014
he Standby Credit Facility (SCF) provides financial assistance to
low-income countries (LICs) with short-term balance of payments needs. The
SCF was created under the newly established Poverty Reduction and Growth
Trust (PRGT) as part of a broader reform to make the Fund’s financial
support more flexible and better tailored to the diverse needs of LICs,
including in times of shocks or crisis. The SCF provides high access,
carries a lower interest rate, can be used on a precautionary basis, and
places emphasis on the country’s poverty reduction and growth objectives.
Financial assistance tailored to country needs
Purpose.The SCF supports LICs that have reached
broadly sustainable macroeconomic positions, but may experience episodic,
short-term financing and adjustment needs, including those caused by shocks. The
SCF supports countries’ economic programs aimed at restoring a stable and
sustainable macroeconomic position consistent with strong and durable growth and
poverty reduction. It also provides policy support and can help catalyze foreign
Eligibility.The SCF is available to PRGT-eligible
member countries facing an immediate or potential balance of payments need,
where the country’s financing and adjustment needs are normally expected to be
resolved within two years, thus establishing a sustainable macroeconomic
Duration and repeated use.An SCF arrangement can
range from 12–24 months. As the SCF is intended to address episodic short-term
needs, its use is normally limited to two and a half out of any five years.
Subject to these limits, an SCF arrangement can be extended or cancelled, and
consecutive arrangements can be approved.
Access.Access to SCF financing is determined on a
case-by-case basis, taking into account the country’s balance of payments need
and strength of its economic program, and is guided by access norms.
1 Total access to concessional financing under the PRGT is
limited to 100 percent of quota per year, and 300 percent of quota in total.
These limits can be exceeded in exceptional circumstances. Access may be
augmented during an arrangement if needed.
Precautionary arrangements. A member
country with a potential but not immediate balance of payments need can treat
access under the SCF as precautionary, in which case no disbursements will be
made. However, countries retain and accumulate the rights to request
disbursements under the arrangement if a financing need were to arise at a later
stage. SCFs treated as precautionary do not count toward the time limits on the
use of the SCF described above.
Streamlined and focused conditionality
Under the SCF, member countries agree to implement a set of policies that
will help them achieve a stable and sustainable macroeconomic position in the
short term. These commitments, including specific conditions, are described in
the country’s letter of intent.
The IMF has streamlined program conditionality to focus on policy actions
that are critical for achieving the program’s objectives. Use
of the SCF does not require a Poverty Reduction Strategy document, but SCF-supported
programs should be aligned to the country’s poverty reduction and growth
Quantitative conditions are used to monitor
macroeconomic policy variables such as monetary aggregates, international
reserves, fiscal balances, or external borrowing, based on the country’s program
objectives. SCF-supported programs aim to safeguard social and other priority
spending, including through explicit quantitative targets where possible.
Structural benchmarkshelp monitor critical reforms
to achieve program goals; progress against these benchmarks is assessed in the
context of program reviews. These measures vary across programs but could, for
example, include measures to improve financial sector operations, build up
social safety nets, or strengthen public financial management. Legally binding
structural conditions have been abolished.
Program reviews by the IMF’s Executive Board play a
critical role in assessing performance under the program and allowing the
program to adapt to economic developments. Reviews are scheduled at most six
Concessional lending terms
Financing under the SCF carries a ¼ percent interest rate, but is subject to
exceptional relief of all interest payments on outstanding concessional loans
due to the IMF through the end of 2014. The SCF has a grace period of 4 years,
and a final maturity of 8 years. An availability fee is levied at 0.15 percent
per annum on the undrawn portion of the amount available for drawing during each
six-month period. The Fund reviews the level of interest rates for all
concessional facilities under the PRGT every two years, with the next review
expected to take place in end-2014.
Access norms provide general guidance
and are used flexibly, representing neither ceilings nor entitlements.
Norms are set at 120 percent of quota per 18month arrangement, or 75
percent of quota if the country’s total concessional credit outstanding
is 100 percent of quota or above (these norms are prorated for
arrangements with duration shorter or longer than 18 months). However,
the norms do not apply for outstanding concessional credit above 200
percent of quota and access will then be guided by consideration of the
access limit of 300 percent of quota, expectation of future need for
Fund support, and the repayment schedule.