Restructured financing facilities reflect changing global economic environment

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The IMF provides financial assistance to member countries with temporary balance of payments problems; it does not provide financing for specific purposes or projects, as development banks typically do (see "IMF at a glance," page 1, for purposes of the IMF). The IMF's financial assistance enables the member to rebuild its reserves or to make larger payments for imports and other external purposes than would have been possible without it. Financing must be approved by the Executive Board.

The IMF provides two kinds of financial assistance: nonconcessional and concessional. Nonconcessional assistance is made available to member countries under a number of policies and facilities, whose terms reflect the severity and duration of the balance of payments problem that the facility is designed to address (see box, pages 12-13). An individual line of credit normally takes the form of a financial arrangement with the member, under which the IMF gives assurance to the member that it will provide funding in accordance with the terms of the arrangement.

Separately, the IMF also provides concessional (lowinterest) loans to low-income member countries through the Poverty Reduction and Growth Facility (PRGF) and provides grants or loans to qualifying members under the Heavily Indebted Poor Countries (HIPC) Initiative to help reduce their external debt.

Regular financing facilities

The IMF provides financing to members from a revolving pool of funds consisting of members' subscriptions, which are held in the General Resources Account (GRA). The recipient member uses its own currency to "purchase" reserve assets (in the form of widely accepted foreign currencies and SDRs) from the IMF. These assets are usually deposited in the member's central bank and can then be used in the same manner as all other international reserves. The IMF levies charges on the financing, and repayment periods vary by facility. To repay, members "repurchase" their own currency from the IMF. The amount of financing a member can obtain from the IMF (access limits) is generally based on its quota.

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IMF credit is subject to the recipient country's observance of specific economic and financial policy conditions, depending on the relative size of the financing involved. For drawings of up to 25 percent of a member's quota (called the first "credit tranche"), members must...

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