IMF Completes Internal Review of ESAF

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The following article-which is based on News Brief No. 97/14, dated July 28-reviews the highlights of a recently concluded internal IMF staff study of the IMF's concessional financing facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF). The full study will be published in the near future.

The IMF's ESAF and its precursor, the Structural Adjustment Facility (SAF), have been supporting adjustment and reform programs in many of the IMF's low-income developing countries for more than ten years. In March 1993, on the basis of a review prepared by the staff, the Executive Board discussed the experience of 19 countries through mid-1992 and concluded that the experience under SAF/ESAF-supported programs had been generally favorable. The current study, completed in June of this year, reviews the experience of 36 countries that had availed themselves of SAF and ESAF financing in support of 68 multiyear reform programs approved prior to December 31, 1994.

This internal review will be complemented by an external evaluation of the ESAF now under way and scheduled to be completed later this year. The external evaluators will use a case-study approach to examine in detail developments in countries' external positions, social policies and the composition of government spending, and the determinants and influence of differing degrees of national ownership Page 248 of ESAF-supported programs. The Executive Board is expected to draw additional lessons for future ESAF-supported programs on the basis of that study.

Scope of the Review

The conclusions of the IMF staff's current review are organized around possible ways in which ESAF-supported programs may be reoriented to achieve more consistently the ESAF's two key and mutually reinforcing objectives:

* sustained higher growth, with improved living standards; and

* progress toward external viability.

[ GRAPHICS ARE NOT INCLUDED ]

The staff review considers several aspects of ESAF-supported programs: the need for further and more growth-enhancing fiscal adjustment that would also improve prospects for external viability; the case for more decisive disinflation as a spur to growth and measures to achieve it; steps to advance structural reform in two areas where performance has continued to lag- the public enterprises and banking systems; and, finally, modifications to...