- WHAT IS AN IMF STAND-BY ARRANGEMENT
- HOW LONG DOES A NEGOTIATION FOR AN SBA LAST, AND WHAT DOES IT ENTAIL?
- WHAT IS THE TYPICAL DURATION OF AN SBA?
- HOW MUCH CAN THE IMF LEND TO A COUNTRY UNDER THE SBA?
- HOW FLEXIBLE ARE IMF LENDING ARRANGEMENTS?
- HOW DOES THE IMF INCLUDE THE VIEWS OF THE SOCIETY IN ITS POLICY NEGOTIATIONS?
What is an IMF Stand-By Arrangement
The Stand-By Arrangement (SBA) is a financing tool of the IMF available to any member country that needs financing to overcome balance of payments problems. The SBA allows the IMF to respond quickly to a country’s external financing needs and supports policies designed to restore sustainable growth. All member countries facing external financing needs are eligible for SBAs, but this option has been more often used by middle-income or high-income countries, since low-income countries have access to a range of concessional instruments.
How long does a negotiation for an SBA last, and what does it entail?
The negotiation process usually takes weeks. A country must first request financial support from the IMF. Following such a request, an IMF staff team holds discussions with the government to assess the economic and financial situation and the size of the country’s overall financing needs, and agree on the appropriate policy response. The member country has primary responsibility for driving the design of the policies that will make the IMF-supported program successful and for implementing them. Typically, a country’s government and the IMF must reach understandings on a program of economic policies before the IMF lends money to the country.
What is the typical duration of an SBA?
The length of an SBA is flexible, and typically covers a period of 12–24 months, but no more than 36 months, consistent with addressing short-term balance of payments problems. Repayment of resources received under the SBA is due within 3¼-5 years of disbursement, which means each disbursement is repaid in eight equal quarterly installments beginning 3¼ years after the date of each disbursement.
How much can the IMF lend to a country under the SBA?
The access limit for nonconcessional lending is 435 percent of a country’s quota, or calculated share in the IMF, net of repayments, over the life of the program and 145 percent of quota on an annual basis. Under the IMF’s “exceptional access policy,” the Fund can lend above these normal limits on a case-by-case basis, subject to study and approval by the Fund’s Executive Board—a 24-person panel that represents the interests of all member countries whose contributions to the IMF are used to finance members in need.
How flexible are IMF lending arrangements?
After understandings are reached on an economic program, the IMF monitors a country’s progress toward achieving its goals. Regular 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. The SBA framework allows for some flexibility in the frequency of reviews based on the strength of the country’s policies and the nature of its financing needs. In addition, we would take into account any unforeseen circumstances that arise over the course of a program—for example, if a country is hit by a shock, such as a natural disaster.
How does the IMF include the views of the society in its policy negotiations?
The IMF maintains an open dialogue with a wide range of citizens in its member countries. We engage regularly with not only the government but also labor unions, academics, students, private sector analysts, think tanks, faith-based associations, and local community groups. This broad engagement can highlight important issues, offer information to supplement official data, and provide insights that may differ from perspectives in official circles.