Source: IE
Context: The IMF Executive Board approved an immediate disbursement of $1 billion to Pakistan under the Extended Fund Facility (EFF).
About Extended Fund Facility (EFF):
- What is the Extended Fund Facility (EFF)?
- EFF is an IMF lending mechanism designed to help countries facing prolonged balance of payments problems due to deep structural economic weaknesses.
- Key Features:
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- Governed by: International Monetary Fund (IMF), part of Bretton Woods institutions.
- Loan Type: Repayable loan, not a grant or financial aid.
- Tenure: Extended period (3+ years), with longer repayment timelines than standard IMF loans.
- Purpose: Facilitates medium-term structural reforms — e.g., improving tax systems, reducing inflation, curbing unsustainable fiscal deficits.
- Disbursement: Tranches released based on periodic reviews of policy implementation by the borrowing country.
- Eligibility Criteria for EFF Loans:
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- Persistent current account deficits or balance of payments stress.
- Deep-rooted issues in governance, investment, tax systems, or financial sectors.
- Willingness and ability to implement IMF-monitored structural reforms.
- EFF Approval Process
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- Country Request: Government approaches IMF, outlining economic needs and reform proposals.
- Staff-Level Agreement: IMF negotiates a program based on reform commitment.
- Executive Board Review: Approves loan after evaluating macroeconomic performance and fiscal roadmap.
- Tranche Disbursement: Funds are released in phases, conditional on reform compliance and progress.
