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Extended Fund Facility UPSC NOTE

 Why in News

The IMF has cleared the second tranche about $337 million , of the Extended Fund Facility (EFF) to Sri Lanka.

 EFF is based on the debt treatment plan drawn up by the crisis-battered island nation and its bilateral creditors.

What is Extended Fund Facility

  • The Extended Fund Facility (EFF) is a lending facility offered by the IMF to countries facing serious medium-term balance of payments problems. 

These problems can stem from:

  • Structural weaknesses within the economy that require time and resources to address.

  • Slow economic growth combined with an inherently weak balance of payments position.

The EFF provides financial assistance to help countries:

  1. Restore macroeconomic stability

  2. Reduce their debt burden

  3. Implement structural reforms to address the underlying causes of their economic problems.

  4. Promote sustainable economic growth

Key features of the EFF:

  • Loans are typically provided for a period of 3 to 4 years.

  • Interest rates are set at market rates, but with a grace period and concessional terms for low-income countries.

  • Disbursements are conditional on the implementing of agreed-upon economic policies.

Examples of recent EFF programs:

  1. Sri Lanka: In March 2023, the IMF approved a US$3 billion EFF program for Sri Lanka to help the country restore macroeconomic stability and debt sustainability.

  2. Côte d'Ivoire: In May 2023, the IMF approved a US$3.5 billion EFF program for Côte d'Ivoire to support the country's transformation towards upper-middle income status.


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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Extended Fund Facility UPSC NOTE
Extended Fund Facility UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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