Adjustment Facility Agreement

If the IMF succeeds, the ESAF will become sustainable and self-sufficient after this period. As soon as it self-implements, the possibility of influencing the IMF by national parliaments will be severely limited. British NGOs insist that ESAF not be refinanced and believe that the IMF should not guarantee ESAF as a permanent financial mechanism. While it is recognized that developing countries need concession financing, the ESAF financing mechanism is severely flawed and unsuitable for the poorest and most indebted countries. This document is divided into three sections dealing with the different roles of the IMF; the first is its role as a funder and whether ESAF is an appropriate mechanism and whether it provides the poorest countries with appropriate resources; Second, it looks at its role in approving adjustment programs and whether it encourages other donors to lend to countries in transition; and, finally, the document examines the Fund`s ability to provide appropriate policy advice. The document concludes with several general recommendations and some more specific recommendations on how to approve the current mechanisms and what action the Fund should take. Despite their urgent need for concession credits, developing countries have refused to use FASD because of perceived deficiencies in their design, including the high degree of conditionality associated with ESAF programmes, but also the short repayment period. This is reflected in the fact that countries are using ESAF resources more slowly than expected. The current FASS funding was expected to be exhausted by 1996. However, countries have used these funds more slowly than expected; The development of adjustment programs has taken a long time; and they often brake before being completed.

As a result, the Fund has extended the current FASD until at least the end of 2000. Over the past ten years, $4.4 billion (US$7.1 billion/4.9 billion SDR) has been paid through ESAF, through 56 programmes in 41 countries. In 1994, the ESAF was increased by 8.4 billion (13.5 billion USD/9.3 billion SDR), of which 3 billion at the end of August 1997 (4.93 billion USD/3.4 billion SDRs). On average, from 1994-96, the IMF paid $0.85 billion ($1.36/SDR0.94) per year. The Fund wants the ESAF to become permanent, and is now seeking further bilateral funding to restore a provisional ESAF between 200 and 2004, after which it expects to have sufficient resources from its own sources and to become pre-ESAF loan repayments for conservation. The IMF hopes to secure sufficient funds for the interim FSA to borrow (commitments) of up to $0.9 billion (US$1.45 billion/US$1 billion) per year. To achieve this, the IMF will need to use up to $3.75 billion ($6 billion/$4 billion) for the credit account and an additional $1.56 billion ($2.5 billion/$1.7 billion) on the grant account. the possibility that the IMF will also provide funds from its general credit account The document argues that the use of quarterly credit ceilings as the main performance criterion in a supply-oriented program, such as the extended fund facility (FEP), is not only inadequate to monitor overall compliance, but may also compromise structural adjustments that are otherwise on track.