A country can draw no more than 25% of its quota in the first tranche of a loan that it receives from the IMF. The first tranche is available to any country, which demonstrates efforts to overcome its BOP problems. The language of this requirement is so vague that it renders virtually all the members eligible to receive the first instalment.
Other tranches are more difficult to obtain (as Russia and Zimbabwe can testify): the country must show successful compliance with agreed economic plans and meet performance criteria regarding its budget deficit and monetary gauges (for instance credit ceilings in the economy as a whole). The tranches that follow the first one are also phased. All this (welcome and indispensable) disciplining is waived in case of Emergency Assistance – BOP needs which arise due to natural disasters or as the result of an armed conflict. In such cases, the country can immediately draw up to 25% of its quota subject only to "cooperation" with the IMF – but not subject to meeting performance criteria. The IMF also does not shy away from helping countries meet their debt service obligations. Countries can draw money to retire and reduce burdening old debts or merely to service it.
It is not easy to find a path in the jungle of acronyms, which sprouted in the wake of the formation of the IMF. It imposes tough guidelines on those unfortunate enough to require its help: a drastic reduction in inflation, cutting back imports and enhancing exports. The IMF is funded by the rich industrialized countries: the USA alone contributes close to 18% to its resources annually. Following the 1994-5 crisis in Mexico (in which the IMF a crucial healing role) – the USA led a round of increases in the contributions of the well-to-do members (G7) to its coffers. This became known as the Halifax-I round. Halifax-II looks all but inevitable, following the costly turmoil in Southeast Asia. The latter dilapidated the IMF's resources more than all the previous crises combined.
At first, the Stand By Arrangement (SBA) was set up. It still operates as a short-term BOP assistance financing facility designed to offset temporary or cyclical BOP deficits. It is typically available for periods of between 12 to 18 months and released gradually, on a quarterly basis to the recipient member. Its availability depends heavily on the fulfilment of performance conditions and on periodic program reviews. The country must pay back (=repurchase its own currency and pay for it with hard currencies) in 3.25 to 5 years after each original purchase.
This was followed by the General Agreement to Borrow (GAB) – a framework reference for all future facilities and by the CFF (Compensatory Financing Facility). The latter was augmented by loans available to countries to defray the rising costs of basic edibles and foodstuffs (cereals). The two merged to become CCFF (Compensatory and Contingency Financing Facility) – intended to compensate members with shortfalls in export earnings attributable to circumstances beyond their control and to help them to maintain adjustment programs in the face of external shocks. It also helps them to meet the rising costs of cereal imports and other external contingencies (some of them arising from previous IMF lending!). This credit is also available for a period of 3.25 to 5 years.
1971 was an important year in the history of the world's financial markets. The Bretton Woods Agreements were cancelled but instead of pulling the carpet under the proverbial legs of the IMF – it served to strengthen its position. Under the Smithsonian Agreement, it was put in charge of maintaining the central exchange rates (though inside much wider bands). A committee of 20 members was set up to agree on a new world monetary system (known by its unfortunate acronym, CRIMS). Its recommendations led to the creation of the EFF (extended Financing Facility), which provided, for the first time, MEDIUM term assistance to members with BOP difficulties, which resulted from structural or macro-economic (rather than conjectural) economic changes. It served to support medium term (3 years) programs. In other respects, it is a replica of the SBA, except that that the repayment (=the repurchase, in IMF jargon) is in 4.5-10 years.
The 70s witnessed a proliferation of multilateral assistance programs. The IMF set up the SA (Subsidy Account), which assisted members to overcome the two destructive oil price shocks. An oil facility was formed to ameliorate the reverberating economic shock waves. A Trust Fund (TF) extended BOP assistance to developing member countries, utilizing the profits from gold sales. To top all these, an SFF (Supplementary Financing Facility) was established.
During the 1980s, the IMF had a growing role in various adjustment processes and in the financing of payments imbalances. It began to use a basket of 5 major currencies. It began to borrow funds for its purposes – the contributions did not meet its expanding roles.
It got involved in the Latin American Debt Crisis – namely, in problems of debt servicing. It is to this period that we can trace the emergence of the New IMF: invigorated, powerful, omnipresent, omniscient, mildly threatening – the monetary police of the global economic scene.
The SAF (Structural Adjustment Facility) was created. Its role was to provide BOP assistance on concessional terms to low income, developing countries (Macedonia benefited from its successor, ESAF). Five years later, following the now unjustly infamous Louvre Accord, which dealt with the stabilization of exchange rates), it was extended to become ESAF (Extended Structural Adjustment Facility). The idea was to support low-income members, which undertake a strong 3-year macroeconomic and structural program intended to improve their BOP and to foster growth – providing that they are enduring protracted BOP problems. ESAF loans finance 3-year programs with a subsidized symbolic interest rate of 0.5% per annum. The country has 5 years grace and the loan matures in 10 years. The economic assessment of the country is assessed quarterly and biannually. Macedonia is only one of 79 countries eligible to receive ESAF funds.