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Helping the Poor: the IMF's New Facilities for Structural Adjustment (PART 3)
Vinod Anand | 30 Nov 2011

Eligible members can receive a great deal more assistance under the ESA I than under the SAF; up to 250 percent of quota over a three-year program period, with provision for up to 350 percent in exceptional circumstances.

NEW FACILITIES for Structural Adjustment (PART 3)(Vinod Anand)Eligible members can receive a great deal more assistance under the ESA I than under the SAF; up to 250 percent of quota over a three-year program period, with provision for up to 350 percent in exceptional circumstances. The broad objectives of programs supported by the ESAF are similar to those of SAF-supported programs, and these programs are also designed on the basis of a policy framework paper formulated by the national anthorities with the assistance of the stalls of the Rind and the World Bank. Disbursements under the ESAF, however, are semiannual instead of annual; with more resources available to countries, it was left that more frequent review of the member?s performance under the program was both reasonable and appropriate. ESAF resources are available to members on the same highly coneessional repayment and interest rate terms as SAP resources.By the end of February 1991, 32 countries had obtained support from the SAP, and 14 countries had obtained support from the ESAP, for their adjustment programs. The Basic Policy DocumentAn essential component of a program under the SAF and ESAF is the country strategy paper mentioned earlier, the policy framework paper (PFP), which is prepared by the national authorities with the joint support of the staffs of the World Bank and the Fund.

The PFP establishes the country?s macroeconomic and structural policy objectives for the next three years, identifies the strategy that will be followed, and estimates the financing that will be needed. It also sets out the sources of the country?s growth and identifies the main macroeconomic and structural constraints on higher growth and better payments performance. The PFP is updated at the outset of each program year, and provides a framework for consistent policy implementation and analysis that is useful both for the authorities and for the international lending community in supporting the country?s adjustment.

As experience with the facility has accumulated, the process has also evolved; policy framework papers have become more detailed, and more specific information is now included on policy measures planned under the adjustment program and on their timing.Commitment is an important element of the potential effectiveness of the strategies contained in the PFPs. While it is relatively easy to identify that a country has a payments problem, the questions of why the problem has arisen and what should be done about it are not always easy to answer. In addition, while orderly and rational adjustment is less burdensome to a country than the emergency adjustment that would otherwise take place, this is not always ohvious to those faced with having to make the decisions, particularly when it is necessary to incur some short-term costs at the outset of the adjustment program in order to provide the basis for longer-term gains later on.

Adjustment programs require, first, full conviction on the part of the authorities that the strategy chosen is appropriate, and, second, courage on their part to implement it over the period that is judged necessary.The PFP is not a blueprint, but it is sufficiently detailed to link the country?s adjustment strategy with the sources of its problems and to show how structural change and payments viability will be achieved and the method that will be used to monitor progress. Since almost all policy measures have some effect on the distribution of income among different social groups, the PEP contains analysis of the social impact of the strategy proposed and describes how the authorities plan to cushion any adverse short-term impact of adjustment on vulnerable groups within the society. A frequent objective of programs under the facilities, for example, is to restore competitiveness to agriculture as the source of future growth for the country, and a typical result of the social impact of measures to achieve such objectives in a program is to redistribute incomes from the urban to the rural sectors.