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Helping the Poor: the IMF's New Facilities for Structural Adjustment (PART 4)
Vinod Anand | 30 Nov 2011

An important element of the PFP is that it provides fairly detailed estimates of the financing requirements of the adjustment program, including those of the public investment program, and identifies the external resources that are expected to be available.

AN IMPORTANT element of the PFP is that it provides fairly detailed estimates of the financing requirements of the adjustment program, including those of the public investment program, and identifies the external resources that are expected to be available. Since the PFP is circulated among potential donors, this specification of the assistance that is going to be needed shows donors where their contributions could be most useful, on the basis of the analysis in the policy document. In addition, the PFP can be, and often is, used by the national authorities as a background document to support their requests for financial assistance.

The more formal coordination between the Bank and the Fund in assisting the country in developing the strategies incorporated in a PFP is a novel contribution to developing consistent and comprehensive country analysis. The Bank lends for structural adjustment or sectoral programs in most of the low-income countries. It is clearly important that the analysis and policy recommendations underlying these lending programs be consistent with and complementary to the funds disbursed under the SAP and the ESAF.

The PEP provides a framework for ensuring this consistency. In general, the staff of the Fund focuses mainly on the macroeconomic framework and objectives and on measures to eliminate financial imbalances, while the staff of the Bank tends to focus mainly on longer-term issues and on the analysis of sector policies and the public investment program and its priorities.PFPs are reviewed by the Executive Boards of both the Bank and the Fund before disbursements are made. As noted earlier, disbursements are made under three-year and annual arrangements that spell out in more detail the specific conditions for the loans. The Fund's Board reviews the PFP after the Bank has done so, and can therefore take into account the views of the Bank Board in its deliberations.

All programs supported by SAF mid ESAF resources aim to restore payments viability to a country in a sustainable way by establishing the conditions under which it can achieve higher rates of durable growth. This does not mean countries concentrate on increasing exports or the domestic production of imported goods only to reduce the trade imbalance. The objective is broader; by increasing the capacity for growth based on the countrys ability to compete in world markets, the country expands its long-term potential 11w raising living standards.

The programs supported by the facilities are, as noted above, developed by the member country, with the assistance of the staffs of the Bank and the Fund, and are tailored to meet the circumstances of individual countries. Although typical problems, such as excessive payments deficits, fiscal deficits, or payments arrears, do mean that programs contain measures to constrain the country to live within its means, the tremendous diversity in the situations of the countries implementing the programs makes for a corresponding diversity in their strategies. Although it is too early to be able to identify clear results from the strategies put in place, some examples will illustrate their diverse objectives and approaches.