• International Monetary Fund (IMF) has cleared a $3 Billion bailout for Sri Lanka.
• An IMF bailout usually comprises a financing package, a structural reforms package (to be implemented by borrowing country) and specific debt conditions.
• India, Japan (as a member of the Paris Club) and China — Sri Lanka’s top three bilateral creditors — played a crucial role in unlocking IMF assistance by providing financing assurances.
• Bailout is provided under IMF’s Extended Fund Facility (EFF), extended when a country faces serious medium-term balance of payments (BoP) problems because of structural weaknesses that require time.

Lending instruments of IMF

• Stand-By Arrangements (SBAs)- Address short-term or potential BoP problems for the emerging and advanced market economies in crises.
• Standby Credit Facility (SCF)- Similar to SBAs. Address the BoP problems for low-income countries
• Extended Fund Facility (EFF)-Medium-term support to countries facing protracted BOP problems
• Extended Credit Facility (ECF)- Similar to EFF. Medium-term support to low-income countries facing protracted BOP problems.
• Flexible Credit Line (FCL): for crisis prevention and crisis-mitigation lending for countries with very strong policy frameworks.
• Precautionary and Liquidity Line: for countries with sound economic fundamentals but with some remaining vulnerabilities that preclude them from using FCL.

 

About IMF

• Specialised UN Agency conceived in 1944 at United Nations Bretton Woods Conference.
• It monitors economic and financial policies of its member countries, provides policy advice to nations for promotion of international financial stability and monetary cooperation.
• Unlike development banks, IMF does not lend for specific projects. It also provides precautionary financing to help prevent crises.
• Members – 190 countries; India is a founding member.