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International Monetary Fund

the availability of first credit tranche conditionality. Tranching . CFF access in conjunction with an upper credit tranche-type arrangement is made available in at least two tranches to ensure that access is aligned with the member’s need and the implementation of corrective policies. Stand-alone CFF access can be made available in a single purchase. However, if nine months or more of the underlying data used for the calculation of the shortfall or excess are estimates, only 65 percent of the total amount of compensatory financing can be made available as a first

Nihad Kaibni

of the ratio of drawings to a member’s quota (quota limit). The maximum permissible amounts of drawings in absolute terms, nevertheless, have increased sharply over the years as a result of periodic quota increases for Fund members and the decisions altering the quota limit on outstanding CFF drawings (see box on limits, and chart for aggregate amount of CFF access). Applying criteria for use The basic requirement for the use of the CFF is a demonstrable, temporary shortfall for the most recent 12-month period for which export data are available. This

International Monetary Fund
The G-8 debt relief proposal, if adopted, should have little impact on the rational and operational aspects of the shocks window, but it may affect some of the financing consideratins, which are taken up in the page on "The G-8 Debt Cancellation Proposal and its Implications for the Fund.
International Monetary Fund

Financing Facility (CFF). Stand-alone CFF access requires that the balance of payments situation be satisfactory apart from the export shortfall. Because of the difficulty in making this assessment in the absence of a program that addresses the appropriate adjustment/financing mix, and the inability of most members to meet this standard, the CFF has been little used in recent years. Moreover, CFF financing is not on concessional terms and it does not cover all exogenous shocks faced by low-income countries. In contrast, a PRGF window could offer financing on concessional

International Monetary Fund

instrument for low-income members. In addition, the duration of some commodity price shocks, although still temporary, may be too long for the CFF access calculations to show a shortfall. 47 Box 3. Compensatory Financing Facility: 2000 Review The last Executive Board review of the CFF was in January 2000. The Board discussed the risk that the relatively low conditionality applying to provision of CFF resources could weaken incentives for adjustment and reform. Directors observed the difficulties in judging the policy cooperation required for a CFF outside the context

International Monetary Fund

existing arrangement in place at the time of the request for a CFF purchase. Access under the CFF is subject to its own limits, and does not count toward the access limits under the credit tranches and the EFF. The CFF access limits range from 45 percent of quota for each of the export shortfall and excess cereal import costs elements to a combined limit of 55 percent of quota. Within these limits, actual access is determined by the size of the shortfall or excess, and may be limited by concerns about the member’s ability to repay the IMF. Access under the CFF

Mr. James M. Boughton

maximum CFF access in the course of the year, based on calculated temporary shortfalls in oil exports, and it estimated that actual requests might come from seven or so countries and total between SDR 2 and 2½ billion through mid-1987. “CFF—Fuel Exporting Countries,” memorandum from William C. Hood (Economic Counselor and Director of Research) to the Managing Director (March 27,1986); IMF/CF (S 1181 “Compensatory Financing of Export Fluctuations, January 1986-March 1987”). 78 The staff conclusion is in “Compensatory Financing Facility—Requests for Drawings by

Mr. James M. Boughton

obtained substantial victories on all counts. A cutback in enlarged access was agreed upon toward the end of 1983, after substantial debate (see above, p. 881). CFF access and conditionality were tightened around the same time (see Chapter 15 ), and an increase in remuneration rates was approved in January 1984 (see below, p. 904). The U.S. delegation at the Deputies’ meetings was headed by Beryl W. Sprinkel, the Under Secretary of the Treasury for Monetary Affairs, and Henry C. Wallich, Member of the Board of Governors of the Federal Reserve System. 123 The